Following the announcement of the mini-budget which laid out plans to implement an estimated £45bn of debt-funded tax cuts, the International Monetary Fund (IMF) has urged the UK government to re-examine their strategy and warned it will worsen what are already soaring inflation rates. The announcement has sparked deep concern from industry leaders in the investment sector following a collapse in the value of the pound sterling following a surge in the country’s borrowing costs. Chris Biggs, CEO of Theta Global Advisors, says the IMF’s response to the mini-budget is “unusual” considering the UK’s status as a G7 nation and a leading world economy.

Although only time will dictate the long-term implications of tax cuts, there are certain sectors in the UK that will benefit from these, such as the property market – is the property market certain to benefit? Predictions this morning have said that prices could fall by 10% – thanks to the stamp-duty cuts, British exporters and potentially local tourism due to a weakening sterling. However, it will become increasingly harder to navigate a successful IPO for companies looking to go public, on what has already been a negative track record in 2022.

UK capital markets and IPO activity have taken a significant hit in the first half of 2022 when compared to the same period last year with over 94% drop in collective proceeds from the London Stock Exchange (LSE) and the Alternative Investment market (AIM). This comes as the result of a series of ongoing factors, including the conflict in Ukraine, inflation reaching 10.1% and the Bank of England’s base interest rate rise to 1.75%. As UK companies steer away from public markets, there is a steady trend of private equity (PE) firms turning their gaze towards the UK as low valuations have produced fertile ground for acquisitions at a “discounted” price.

Chris Biggs, CEO & Founder of Theta Global Advisors, comments on the implications of the mini-budget:

“There will be benefits in terms of growth regarding the mini-budget, however, the risk associated with this type of fiscal policy at a time of high inflation and even higher borrowing costs has resulted in a loss of over $500 billion in combined value from UK stocks and bonds since September 5th. In what was already an uncertain time for investors and businesses following socioeconomic and geopolitical turmoil, the market speaks for itself when it comes to investor confidence into the UK. The UK has mostly been regarded as a haven for safe investments, at the moment, this is not the case, for many companies this will result in less accessibility to necessary capital for growth”