LIZ Truss-supporting investors made “small fortunes” as the value of the pound plummeted following the radical Conservative budget announced on Friday, a report has claimed.
The pound slumped to near parity with the US dollar last week, after Chancellor Kwasi Kwarteng unleashed a budget which would cut taxes for the super-rich by massively increasing public borrowing.
The UK currency was worth just $1.09 following the announcement – its lowest level in decades.
An anonymous source quoted in the Sunday Times told the paper they had attended a dinner with hedge-fund managers who were said to have won big betting against the pound last week.
They were quoted as saying: “They were all supporters of Truss and every one of them was shorting the pound.”
The paper added: “Several made small fortunes on Friday betting against the currency.”
The process is called shorting and allows traders to make “bets” that the value of an asset will fall, whereas more conventional trading is effectively a bet the value will rise.
Responding to speculation the traders were given insider knowledge of the budget before it was announced – which would be illegal if it were used for their financial gain – Tim Shipman, who co-authored the piece, said: “It's not fraud, it's just a bunch of city people having a view and betting on it. It wasn't a Tory dinner where the mysteries of the budget were secretly conveyed over the canapes.”
Tax cuts worth £45 billion will be funded through public borrowing, with the Truss Government ripping up the Tory rule book by raising debt to historic heights.
It is part of the Government’s stated drive to focus almost solely on boosting economic growth, which is languishing.
The Bank of England has said it is likely the UK is already in a recession though it is too soon to tell for certain.
The Chancellor yesterday told the BBC he thought the recession forecast for the country would be “shallow”.
He was faced with scathing criticism from experts and political opponents for his plans, with the Institute for Fiscal Studies saying the measures were drawn up “without even a semblance of an effort to make the public finance numbers add up”.
Alison Thewliss, the SNP’s Treasury spokesperson, said the measures would trigger “inevitable public sector cuts” and plunge “broke, broken Britain” further into crisis.