Former Asda boss says government is betting on the economy

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Former Asda boss says government is betting on the economy

Sir Stuart Rose, chairman of Asda and former chief executive of Marks and Spencer, told the BBC that the government is gambling with the UK's economic future, like the mini-budget to a bet on a horse race.

He said that the whole of the UK economy was on the 3: 30 mark in Epsom. If it comes in people will cheer, but if it doesn't people will be in a very difficult position. He pointed out Asda's income tracker shows that the poorest 20% of households are already spending 60 more than they are earning every month, which is a reason he doubts the UK economy's ability to grow.

The companies are facing a vicious squeeze on customer budgets and their own borrowing costs have rocketed in the last year, making it very difficult for firms to invest and grow their own business and the economy as a whole.

In October of last year, the S&P Investment Grade Corporate Bond index showed that UK companies that are considered to have strong financials deemed investment grade could borrow for 10 years at 1.76%. That debt is now costing 6.1%.

Well-known names that are slightly below investment grade e.g. If they needed to borrow right now, the interest rates for a five-year loan would be more than 10%, according to Marks and Spencer.

Companies that use the bond market to raise money will have a lot of loans with fixed and different end dates, so they won't be paying more right now. Bankers say that the corporate lending market is expensive to the point of practically being shut down for those with loans maturing and hoping to roll them over into new loans.

One banker told the BBC: No one knows the value of anything right now, meaning that no one will be doing anything until this massive uncertainty clears. He said that many firms were looking to reduce debt, which could mean selling off non-core parts of their business.

While it is early days, few firms are looking at ways to invest money into new projects - which is the outcome that the chancellor desperately wants to achieve.