Goldman Sachs sees deeper UK recession after tax U-turn

NEW YORK: Goldman Sachs analysts have downgraded Britain’s economic outlook after Prime Minister Liz Truss removed Kwasi Kwarteng as chancellor and reversed a freeze in corporation tax, Bloomberg News reported on Sunday.

“Folding in weaker growth momentum, significantly tighter financial conditions, and the higher corporation tax from next April, we downgrade our UK growth outlook further and now expect a more significant recession,” Bloomberg cited the investment bank’s report as saying.

Goldman revised its 2023 UK economic output forecast to a 1% contraction from an earlier forecast for a 0.4% output drop, with core inflation seen at 3.1% at the end of 2023, down from 3.3% previously, Bloomberg said.

On Friday, Truss said Britain will go ahead with corporation tax rise to 25% next year, making an U-turn on a pledge to freeze it at 19%.

Goldman Sachs did not immediately respond to a Reuters request for comment.