Leading economist Andrew Webb issues stark warning at Business Travel Association conference
The government’s ‘mini-Budget’ last week triggered “chaos” in the financial markets and caused businesses to fear what is coming next, a leading economist has told the Business Travel Association (BTA).
Speaking at the BTA conference in Belfast on Tuesday, Andrew Webb, chief economist at professional services firm Grant Thornton, said: “We’re in the most uncertain economic times in my 25 years as an economist.
“There has been chaos in the markets since Friday and we’re seeing a run on the pound.
“We’re getting daily forecasts of where inflation might peak. There is probably already a recession in the UK. Interest rates were forecast at 2.75% a few weeks ago.
A week ago, it was expected rates would peak at 4%. Now they’re expected to peak at 6%.”
The pound fell dramatically to $1.04 against the dollar following chancellor Kwasi Kwarteng’s announcement of tax cuts funded through borrowing on top of the promise to spend up to £150 billion on capping energy bills for households and businesses.
Webb warned the pound would fell to parity with the dollar and perhaps below, warning: “This hasn’t been seen before and would have dramatic consequences, leading to a lack of confidence in the UK economy.”
He noted the government cap on energy prices “should soften some of the blow” but said: “We’re starting to see business sentiment tail off.
“Business fears what is coming next, and when businesses fear what is coming next they pause investment and recruitment and cancel events.”
Webb told BTA members and partners: “Consumer sentiment is also a big concern. It’s considerably down.
“We have yet to see what happens following the energy price cap, but I suggest it will fall further with the forecasts on interest rates.
“There is a risk of economic contagion. Sentiment is volatile. The markets are spooked. It’s a period of chaos.”
Without the mini‑Budget of last week, he suggested the prospects for travel had been broadly healthy despite the economic outlook, saying: “The global economic prospects are still for growth [and] global travel is back in growth mode.”
But now he said: “How consumers feel will have a massive impact. People are having to think about switching from spending on desirable goods to buying essential goods.
“If the pound falls to parity with the dollar or below it will be a real psychological blow.”
Webb suggested the government’s claim that tax cuts for the wealthy would benefit everyone “makes no sense” and noted: “Most recent Conservative Budgets have unravelled over a week or two.”
He added: “Five days ago, I would have told you a story about labour markets and their impact on the economy. But not now. It’s chaos out there.”