Despite the tax U-turn, many claim that the UK economy is still in trouble

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Last Updated on October 3, 2022 by Bitfinsider

Despite the administration of new Prime Minister Liz Truss doing a quick tax U-turn, Britain’s debt-fueled economy remains in danger of a recession and the pound is entrenched in difficulties.

Sterling was marginally higher on Monday, October 3, having just rebounded from a record low versus the US dollar following the budget, which was perceived as favoring the richest citizens of Britain during a time of cost-of-living crisis.

The benchmark FTSE 100 index in London was down roughly 5%, reflecting down on international equity markets.

Government bonds in the UK, known as gilts, are still being supported by an emergency intervention by the Bank of England after yields skyrocketed in the wake of the debt-fueled budget late last month.

The embattled British finance minister Kwasi Kwarteng announced Monday on Twitter that he would no longer be eliminating the top income tax rate of 45% imposed on the highest earners.

The budget, which also eliminates a restriction on bankers’ bonuses, reverses a planned increase in corporate earnings, and lowers taxes for all workers, was left unchanged.

The decision to borrow billions more pounds (dollars) to pay for the cuts had drove the pound to an all-time low last week, nearly at parity with the dollar, and put pension funds at danger from rising bond yields.

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