The pound and the London stock market plunged into what one analyst called ‘the worst day I’ve ever seen’ after the Chancellor revealed his mini-budget on Friday.
Sterling fell to new 37-year lows against the dollar repeatedly throughout the day, slowly moving towards its low.
At its lowest Friday afternoon, £1 could be bought for just $1.0896 – the worst exchange rate for Britons since 1985.
It was down more than 3%, meaning the pound has lost more than 7% of its value against the dollar in just a month.
Normally a falling pound is good for the FTSE 100 – making it cheaper for people outside the UK to buy British-made products.
But Friday was not a normal day.
London’s top index fell below 7,000 points for the first time since mid-June in trading on Friday.
At its low, the index traded 2.5% to 6,981.5, its lowest level since March, when the market plunged after a nuclear power plant in Ukraine caught fire.
“This is the worst day I’ve ever seen in the markets from a UK perspective,” said Neil Wilson, an analyst at Markets.com.
At the end of the day, the FTSE was closed at 7,018.6, down 140.92 points or 2%.
The FTSE 250 and FTSE All Share indices also both closed 2% lower.
“By throwing Rishi Sunak’s tax-raising plans on the fire, the government is taking a big gamble that growth will be fueled to help the economy grow,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown.
“But confidence that these unfunded tax cuts are a coherent policy for the current time of inflation is fading as the pound slides to new 37-year lows against the dollar at 1.10 and the borrowing cost of the government escalate.
“The yield on 10-year Treasuries shot up to 3.7%, rising from 3.2% on Tuesday, as investors demanded higher returns for the greater risk they were taking by buying government debt.”
The recent plunge in the pound is unusual, despite a rise in interest rates.
“This is not supposed to happen in developed countries: we expect spending with deficits to drive up interest rates and raise currencies, which happened under Reagan,” said Paul Krugman, an American economist who won the Nobel Prize in 2008.
He added: “But Britain is now acting like a developing country, where perceived fiscal irresponsibility undermines confidence in the value of its currency.”
Decreases were also recorded on the international markets. Germany’s Dax index fell 2% and Paris Cac 40 fell 2.3%
On Wall Street, the S&P 500 was down 2.3% shortly after markets closed in Europe. At the same time, the Dow Jones fell 2%.
The price of Brent crude fell 5.2% to $85.72 a barrel, the lowest level since the start of the war in Ukraine.
In company news, shares in Made.com crashed by a fifth after the company revealed it was considering job cuts and a possible sale of the company.
The company is conducting a “strategic workforce review” to reduce costs as it faces a decline in consumer spending and supply chain disruption.
The ETN has reported that more than a third of the workforce could disappear.
Meanwhile, Revolution Beauty has announced that it will investigate its failure to monitor its own results quickly enough. The company also issued a profit warning. Shares were suspended late last month, so didn’t move on the day.
The biggest risers on the FTSE 100 were Haleon, up from 11.45p to 277.45p, Experian, up from 50p to 2,627p, Halma, up from 36p to 2,061p, Pershing Square, up from 45p to 2,790 p, and Intertek, up from 50p to 3,761p.
The biggest decliners on the FTSE 100 were JD Sports, down 7.55p to 105.9p, Harbor Energy, down 29.5p to 452.6p, Natwest Group, down 16p to 242.4p, Anglo American , down from 169p to 2,670p, and Land Securities, down 34p to 535.8p.