Keynesian economics explains why recessions can become self-reinforcing when demand, confidence and investment fall. This Sentoria article explores aggregate demand, fiscal policy, government intervention, employment, public investment and the practical lessons Keynesian economics offers for business owners, directors and managers.
UK government borrowing fell to £16 billion in June as tax receipts increased and inflation-linked debt-interest costs declined. However, borrowing remains above forecast for the financial year and public debt is close to 95% of GDP.
The next UK prime minister will inherit a difficult economic backdrop of weak growth, high borrowing costs and stretched public finances. Andy Burnham may be able to offer a political reset, but markets and businesses will judge him on fiscal credibility, Treasury appointments and whether he confronts economic reality rather than relying on optimistic forecasts.
The pound weakened and UK government bonds remained cautious after Sir Keir Starmer announced his resignation as prime minister. Markets appear to have priced in much of the political risk, but attention is now turning to Andy Burnham, the leadership timetable, the next chancellor and whether the UK’s fiscal rules will remain credible.
The pound has weakened as speculation over Sir Keir Starmer’s future adds to concerns over UK political stability, borrowing costs and fiscal credibility. Markets may tolerate a change of prime minister, but they are likely to prefer a swift and orderly transition over a summer of uncertainty.
