Goldman Sachs sees deeper UK recession after tax U-turn

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 per cent contraction from an earlier forecast for a 0.4 per cent output drop, with core inflation seen at 3.1 per cent at the end of 2023, down from 3.3 per cent previously, Bloomberg said.

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

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