Market confidence in UK is 'fragile' and could be blown away by any government

Former National Audit Office chief Lord Morse has expressed concerns to Parliament about the UK's "fragile" market confidence. Reflecting on his decade-long tenure as comptroller and auditor general until 2019, he highlighted the recent increase in gilt yields and the tumultuous response to Liz Truss's mini-budget from two years ago as evidence of this fragility.

Addressing the House of Lords, the independent crossbench peer remarked: "The current rise in gilt prices, viewed alongside the market reaction to Liz Truss’s mini-budget, show that market confidence in the UK can be fairly described as fragile at the moment.

"Any government of whatever political stripe is likely to sow the wind and reap the whirlwind if they implement policies which ignore business confidence and stability."

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His comments came amid heightened concern over rising gilt yields—government bonds with fixed interest rates and traditionally low risk. The yields have climbed higher than during the period of Truss's mini-budget, and concurrently, the pound's value against the dollar has dipped, now standing at 1.21 dollars compared to 1.34 dollars back in September 2024.

In response to these developments, Treasury minister Lord Livermore said: "Financial markets are always evolving and it is a long-standing convention that the Government does not comment on specific financial market movements.

"Lord Morse does mention though the Liz Truss mini-budget, which crashed the economy, and current conditions are very different to when Liz Truss crashed the economy, when long-dated bonds were most significantly impacted due to market dysfunction.

"That market dysfunction was caused by unfunded tax cuts, unrealistic spending plans and undermining the institutions that are crucial to economic stability – the Treasury, the OBR and the Bank of England – which pushed up mortgage costs by £300 a month, for which working people are still paying the price.

"And yet there is still no apology from the party opposite, instead they try to defend it."

Labour peer Lord Eatwell also pointed out that the euro market has "fallen against the dollar to the same extent as has the pound" and the US Treasury bill market has "shown the same spike as the UK".

The former senior Labour adviser also praised Chancellor Rachel Reeves, describing her as "outstanding".