A broad-based stabilization in fiscal governance and cross-Channel relations has lowered economic policy uncertainty levels in the UK over the last year, with both the “moron risk premium” and its Brexit-related equivalent beginning to evaporate in financial markets. In an effort to bolster popular support, Prime Minister Rishi Sunak’s government has pivoted toward cutting taxes and increasing spending – steps that are unlikely to alleviate price pressures, but might help put the economy on a better footing in the long term. And with a general election due to land before January 2025, opinion polls are pointing to a landslide victory for the opposition Labour Party, raising investor hopes for a gradual rapprochement with the EU.
UK-EU gap between Economic Policy Uncertainty Indices