UK minister reassures Washington on restored economic stability, fiscal plans

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Britain’s financial services minister sought to reassure US counterparts on Wednesday that the UK's bout of debt market instability last fall was a one-time event and it has returned to stable government and remains a solid partner for Washington and Wall Street.

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Andrew Griffith, Britain’s economic secretary to the Treasury, told Reuters in an interview that Prime Minister Rishi Sunak's economic plan was lending confidence to financial markets that Britain can withstand a difficult economic environment ahead.

“We are back to stability, we are open for business. There’s clear political leadership,” Griffith said. “The prime minister’s set out his objectives for 2023, halving inflation, getting the economy back to growth and debt reduction over the medium term.”

The sales job is a challenging one as Britain tips into recession this year, battles high inflation and a cost-of-living crisis while underperforming its European peers.

Some investors have begun rethinking their support for Britain’s economy after months of political turmoil, persistent Brexit uncertainties and a recession the Bank of England said could last into 2024. Details of many of Sunak's plans to revive Britain’s economy have yet to be announced.

But Griffith said the turmoil brought on by former Prime Minister Liz Truss’ tax and spending plans was a one-time mistake, and solid fiscal and growth plans were now taking shape.

“That was a moment in time,” he said. “People understand the strength of UK institutions,” he said.

In Washington, Griffith met with US Deputy Treasury Secretary Wally Adeyemo, Securities and Exchange Commission chair Gary Gensler, and officials at other regulatory institutions, including the Federal Reserve and the Commodity Futures Trading Commission.

Growth plans

Griffith said he was also discussing Sunak’s plans to revive UK growth by encouraging more investment in several key sectors, including life sciences, technology, financial services and fintech.

Under his remit, this includes the Sunak government's proposed reforms to bolster the City of London's status as a global financial center, which has been under strain since Brexit ushered in new competition from Amsterdam, Paris and Frankfurt.

The so-called “Edinburgh Reforms,” call for a review of rules put in place after the 2008-2009 financial crisis, and easing capital requirements for smaller lenders.

The reforms aim to make financial markets work more efficiently through faster trade settlements and more appropriate regulation and coordinated development of fintech and crypto currency markets with other financial capitals, he said.

Asked about the potential for layoffs in the City of London as major banks such as Goldman Sachs and Citigroup prepare to cut thousands of jobs, Griffith said London would thrive as a banking center amid economic headwinds.

“I understand as we look at a different rate environment, as people look at the global macro, they will take decisions, quite rightly themselves, about right-sizing their organizations for the amount of business they expect to do,” he said. “But London remains competitive.”

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