Kwarteng to meet bankers, investors in crisis meeting

On Tuesday, Kwasi Kwarteng is meeting with Britain's top bankers and other senior City figures in planned talks that are likely to turn into a crisis meeting after the sell-off of the pound and government bond market meltdown.

Banks were among the biggest beneficiaries of Friday s mini-budget when the chancellor scrapped the EU banker bonus cap and the top 45% income tax, cut stamp duty to prop up the housing market and launched an ambitious package of regulatory reforms to be unveiled this autumn.

The pound and government bonds went up as the scale of the tax cuts, overwhelmingly beneficial to the better-off, shocked markets and caused concerns about how they will be paid for.

The Office for Budget Responsibility, the government's fiscal watchdog, was not asked to give any forecasts on how the package will affect government borrowing and economic growth in the coming years. Kwarteng requested that the OBR sets out a full forecast on 23 November alongside the medium-term fiscal plan.

Jim Reid, a strategist at Deutsche Bank, said: "When it comes to the last 24 hours, UK assets have remained at the heart of the storm as the negative response to the government's mini-budget on Friday continued." The country s government bonds were completely routed for a second day. Markets are bracing for more volatility. The pound hit an all-time low of $1.035 on Monday morning and is now trading at $1.08, down 7% this month, but up on Tuesday.

The UK government borrowing costs are on course for their biggest monthly rise on record, going back to the 1950s, as international faith in Britain is battered by Kwarteng s borrowing binge to fund tax cuts. The yield on the 10 year benchmark gilt, or government bond, has gone up to 4.1%, from 3.1% before the mini-budget. Yields the return on a bond move up when prices go down.

Mortgage rates have gone up, and several mortgage providers have pulled deals, with economists predicting that interest rates could rise to 6% by next summer.

Banking and insurance stocks have taken a hammering as the bosses of Britain's top banks, insurers and fund managers prepare to meet the chancellor, Andrew Griffith, the new city minister.

While the meeting had been called to discuss Kwarteng's growth strategy and deregulation plans dubbed Big bang 2, harking back to Margaret Thatcher's 1980 reforms, the financiers will be looking for reassurances on how the government can restore investor confidence.

Kwarteng has so far refused to comment publicly on the slump in the pound, insisting that he does not comment on market movements.