City Turmoil Could Cost $20B in Losses

Due to London financial market troubles, Britain's treasury may lose $20 billion in annual revenues for two to three years

The recent turmoil in financial markets could cost the Exchequer as much as £10bn per year in lost revenues. Research by Credit Suisse based on past market downturns suggests that a 10 per cent fall in real share prices "might eventually be associated with a 7.5 per cent fall in business investment and a 2.5 per cent fall in consumer spending. The larger part of the impact on business investment comes through over a two to three year period. It takes longer in the case of consumer spending". This would equate to about 2 per cent of GDP, a significant hit, with an implied reduction of around the same magnitude in Government revenues, or approximately £10bn per year by the end of the timescale.

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