Zahn believes that if Reeves had gone ahead with income tax rises, as initially expected, markets would have done well. “Without having a bigger, more credible tax plan, it complicates things, creating uncertainty. She won’t do austerity measures or cut spending so the only thing she can do is increase taxes,” he said.

Personal tax rises are no longer on the cards, with suggestions including a so-called mansion tax (with properties valued above £1.5 million ($2 million) facing a new tax), as well as further changes to inheritance tax, such as changes to gifting rules.

For weeks, economists and pundits have wondered what Reeves might do in terms of tax hikes and other adjustments to close a gap in public finances, which according to some estimates is more than £40 billion. The editor of this publication considers some of the issues, and from an international vantage point, here.

Gilts
The yield on 10-year government bonds, aka gilts, jumped by more than 0.13 per cent to trade at about 4.75 per cent last Friday, after Reeves ditched plans to raise income taxes, making some wealth managers remain optimistic on gilt investing. The cost of UK government borrowing rose by the most in a single day since early July.

However, Zahn is not optimistic about the UK’s gilt market, saying it is too unpredictable. “We need a more credible tax plan. If she did something big on taxes, yields would fall. If she disappoints, yields could rise further to unsustainable levels of about 6 per cent which forces her hand, making her do a secondary budget,” he said.

This week, Luke Hickmore, investment director – fixed income at UK-based , used soft UK economic data earlier in the month to remove his triple weight to gilts added over the summer. ''We were fairly agnostic UK risk and with political challenges likely heading to Budget day; we took advantage of the move and reduced our exposure,” he said in a note. ''The chat of no tax hikes coupled with weak US employment data saw the relationship reverse. Having 'sold' UK, we 'bought' half our position back. That’s pretty much a pure value call, as we remain concerned about short-term politics more than economic fundamentals,” he continued. “We say we run a global fund: UK was less than 5 per cent of duration, now closer to 10 per cent even after the purchase; gilts had a good run but remain highly volatile, with the outlook uncertain.”

In addition, at the London event this week, Michael Browne, global investment strategist at Franklin Templeton Institute, highlighted that investment is forecast to remain weak and unemployment will rise, with business investment intentions still weak. Savings are also high, with the desire to save having risen. “Survey evidence suggests that many households are seeking to rebuild savings, partly due to concerns over increased taxes and job losses, as well as higher savings interest,” he said.

With inflation still quite high, Zahn believes that there will be one or two more interest rate cuts, with possibly one in December. “The UK is in a race with France over who can destroy their country the fastest. France was ahead but now the UK is pulling in front. The difference is that France is in the EU, with the banking of the European Central Bank (ECB). The UK needs to be more aggressive,” Zahn concluded.