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You are here: Home / British Sterling / UK’s financial situation a concern for investors

UK’s financial situation a concern for investors

July 21, 2017 by Lewis Edmonds

UK’s financial situation a concern for investors

Pound Sterling remains under pressure today following more negative information regarding the UK’s economy. The UK Government was forced to borrow an additional £2bn this year as it paid higher interest on its level of debt. Higher inflation, from a weaker Pound following Britain’s decision to leave the EU meant that the Government paid more money on bonds linked to inflation (Otherwise known as index-linked bonds), delayed payments to the European Union and changes to the way the self-assessment taxes are collected.

What is more worrying is the position that the UK is now in as a result of this. Household debt is currently worse than pre-2008 financial crash levels with an official spokesman stating:

“Today’s release shows that our national debt, at £65,000 for every household, is still too high and leaves us vulnerable to any future shocks”

Any whispers of a slowdown in the UK economy could cause the Pound’s value to drop quickly. Next week’s GDP (Growth Domestic Product) data release will be significant – a weaker than expected figure could indicate the UK economy is near to recession territory and could pose serious implications for Sterling.

In order to combat the growing national debt, Phillip Hammond will likely implement higher taxes – where these will be imposed will not be debated until the Autumn Budget statement. What is worth noting is that at the Mansion House speech earlier this year, he made a nod towards the public being weary of years of austerity.

This is not painting a very pretty picture for investors at the minute. National debt stands at 87.4% of GDP a record high. It wouldn’t surprise me for the Pound to loose further ground against major currencies in light of this information. Today’s news combined with the news that the UK will not be raising interest rates anytime soon has caused the Pound to hit an 8-month low against the Euro and drop below the 1.30 resistance level against the Dollar.

Filed Under: British Sterling Tagged With: Gross Domestic Product (GDP), Pound Sterling weakness

The information on this website is provided for information purposes only. It does not constitute advice to any person on any matter. Every reasonable effort is made to ensure that the information is accurate and complete but we assume no responsibility for and offer no warranty with regard to the same.

About Lewis Edmonds

When he is not offering insights into the what is happening on the currency markets Lewis manages key relationships for an authorised payment institution in the UK.

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