Chancellor warns of ‘fallout Friday’
THE financial markets and business could face turmoil if Labour wins the General Election, the Chancellor has warned.
George Osborne said Britain should brace itself for ‘fallout Friday’ if the electorate turns to Ed Miliband and Labour.
In an interview with the FT the Chancellor expressed his concern that the credibility built up by the Toryled Coalition could ‘evaporate in five minutes’.
The Chancellor’s remarks came amid signs that financial markets are braced for a period of turmoil, with the major parties running neck and neck in the polls.
an index which measures foreign exchange market volatility climbed to i ts highest level since May 2010 in Monday trading, reflecting growing anxiety among traders and analysts about the election outcome.
The index currently stands at 17.85pc, having soared from just 5pc at the start of this year.
In a note to clients, investment bankers Goldman Sachs say that sterling is most at risk from a ‘market unfriendly’ outcome.
Goldman fears the election could lead to concerns about budgetary discipline and that could lead to a rise in the yields on British government stocks known as gilts. The risk attached to investment in UK-exposed shares could also rise.
as the election has drawn closer, the volatility index, based around the pound-to-dollar exchange rate, has measured increased uncertainty. Last week it was revealed that private investors have been voting with their feet, pulling £1bn from equity funds in March.
Business is particularly concerned by a long period of wrangling among the par- ties. In a letter to the Telegraph, to be published today, 20 London-based business leaders say the parties must place the national economic interest above their parties’ political needs.
The letter cautions politicians against setting ‘arbitrary targets’ for allowing skilled employees and students – all of whom make a big contribution to the financial sector – into Britain.
In his interview the Chancellor says Britain is still navigating a difficult global economic situation and that the country should not risk the recovery. He argues that Labour’s agenda of higher taxes on wealth, looser targets for deficit reduction and a tendency to ‘meddle in markets’ would damage Britain’s global reputation.
Earlier in the day, Labour leader Ed Miliband sought to enlist the permanent secretary to the Treasury in his battle to demonstrate that the surge in government borrowing in Labour’s last years in office was the result of the financial crisis, not profligacy. He quoted Sir Nick Macpherson as saying: ‘The crisis was a banking crisis pure and simple. Excessive risk had built up and the regulators f ailed to appreciate the scale of that risk or to address it.’
What Miliband failed to say is that spending, borrowing and debt were all on an upward trajectory in 2007 and 2008 before the financial crisis reached its peak.