Glenn Barklie, Chief Economist at Investment Monitor suggests: “Economically, a weakening British pound makes it more expensive for UK companies to import goods and services from abroad.” He adds: “The pound has fallen to a record low against the US dollar. And the new Conservative government are taking a big gamble with the UK economy.”
Despite all of the statements put forth by different industry experts and leaders, there is a similar pattern that prevails in terms of how the pound started to tumble.
The Bank of England has issued a statement on Twitter: “The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term.” This statement has created new predictions by businesses and further sparked businesses to renew their deals and investors to look into new prospects.
In addition, economists have set forth that the Bank of England will raise the interest rate from the current 2.25% to 5.8% by next spring. However, this foreseeing has led to some lenders removing mortgage deals and business deals from the table.
What should businesses do next?
Although there are many predictions and changes happening and yet to happen there are a few suggestions that experts are pushing forward.
A suggestion is provided by Barrett Kupelian, Senior Economist of PwC UK: “To achieve higher levels of sustainable economic growth rates requires a broad set of tools and policies. Crucially, it requires addressing the root cause of low productivity in the UK.”
In terms of savings, if the Bank of England increases interest rates, holding savings or investments in pounds generally becomes more beneficial and attractive which can lead to boosting the demand rates for the pound. Also, opening room for investment can enhance the demand for the pound and ultimately lead to an increase in the value of the pound.
Overall, what businesses will expect and face will be projected in the near future with new statements to come from Kwarteng and the current government.
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