Pound's Healey Relief is Fragile, Warns deVere's Green

John Healey in his No 11 Downing Street office after being appointed. Picture by Kirsty O'Connor / Treasury.

The calm that greeted John Healey's appointment as Chancellor is fragile, warns deVere's Nigel Green.

Markets welcomed the surprise choice of John Healey for the Treasury, but the boss of one of the world's largest independent financial advisory organisations says investors are drawing the wrong conclusion.

"Investors are betting on the wrong person again," says Nigel Green, CEO of deVere Group.

The warning comes with gilt yields easing back and Sterling steadier on Healey's appointment, the GBP/EUR rate recovering to 1.1772 from Monday's low at 1.1759.

The relief follows a shaky start to the Burnham premiership on financial markets, in which the new Prime Minister's borrowing comments sent the Pound and gilts lower in tandem.

The ten-year yields went up eight basis points to 5.049% while thirty-year borrowing costs rose to their highest since late May.

For Green, that Monday episode, not Tuesday's recovery, is the tell.

"Healey does not set the direction of this government, Burnham does, and Burnham is a Prime Minister who spooked the bond market within 24 hours of taking office by promising a 'new economic model' and telling reporters he would use 'any flexibility' he could find within the fiscal rules," he says.

"None of that changes because a more familiar face now sits in the Treasury."

The Man Now Holding the Purse Strings

Green argues Healey's own record makes him an unlikely check on Burnham's appetite for spending.

"This is a Chancellor whose defining trait in government was asking the Treasury for more money as Defence Secretary, right up until he resigned from Keir Starmer's administration," he says.

"Now the man who spent years pushing to loosen the purse strings is the one holding them."

The characterisation has support elsewhere: Lloyds Bank counts Healey's appointment among the signals of a more expansive fiscal strategy, noting he argued defence spending must reach 3% of GDP by 2030 when he quit last month.

"Healey might manage how the flexibility gets used. He was never appointed to prevent it, because preventing it was never the plan," says Green.

The appointment, he adds, "is not evidence the pressure to spend has gone away. It is evidence Burnham knows the market needed reassurance while he works out how far he can push."

Prepare, Don't Relax

Green's message to investors is that the current calm is the window in which to act, not a reason to stand down.

"This is, arguably, the moment to prepare, not relax," he says, arguing the easing in gilt yields and the marginal rally in Sterling reflect relief that Monday's worst case did not repeat itself, nothing more.

"Reviewing exposure to UK gilts, diversifying sterling holdings and stress-testing portfolios against a renewed sell-off should be happening now, while conditions are calm, rather than after an autumn statement confirms the debt load has grown again."

"Confidence built on one appointment and one quiet trading session is the most fragile kind there is," he adds.

Green concludes that markets have so far rewarded "a name and a pause, not a policy," and says Britain has made that mistake before.

"Until Burnham rules out further borrowing dressed up as 'flexibility', no Chancellor, however experienced or well regarded, can protect this country, or investors' portfolios, from a Prime Minister whose first instinct in office was to reach for more room to spend."