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The past week has been a tumultuous one for the government, marked by resignations, reshuffles, and market turbulence. The fallout from these events will undoubtedly shape the contents of the Chancellor’s iconic red box outside of No 11 Downing Street in the weeks to come.
Rachel Reeves is set to hold the briefcase for the second time on November 26. Despite the uncertainty surrounding other governmental figures, Reeves’ position seems secure, as evidenced by her demeanor during a recent announcement in Birmingham. Market reactions to the potential departure of the Chancellor earlier in the summer led to an increase in borrowing costs, further solidifying Reeves’ hold on her position.
Throughout the summer, Reeves engaged in a nationwide listening tour with businesses and took time off on the Cornish coast, while global bond markets displayed signs of fragility. The possibility of a £50 billion shortfall raised concerns about potential IMF loans. However, as the week progressed, bond markets saw fluctuations influenced by global trends, rather than specific domestic issues in the UK.
The Chancellor dismissed notions of a UK-specific problem based on bond market activity, maintaining that any challenges were in line with broader economic movements. The Bank of England Governor also downplayed concerns, emphasizing that long-term borrowing represents a small fraction of overall government debt. Moving forward, Reeves and her team will navigate the complexities of the upcoming Budget, balancing market pressures with economic forecasts and potential revenue adjustments
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