The Aftershock of QE: A £22bn Problem and a £6.4bn Market Rout

The aftershock of the quantitative easing (QE) policy was felt powerfully on Friday, manifesting as a £22 billion fiscal problem that in turn triggered a £6.4 billion market rout for UK banks. A new report shone a spotlight on the long-term costs of QE, prompting a tax proposal that sent investors running for cover.
The report, from the IPPR thinktank, detailed how the crisis-era policy is now causing a £22 billion annual drain on public finances through interest payments to banks. The IPPR’s proposed solution—a windfall tax to reclaim some of this money—was the epicentre of the market tremor.
The resulting rout saw the share prices of all major UK banks fall significantly. NatWest was the worst hit, with a drop of nearly 5%, but the entire sector felt the shockwave. The £6.4 billion loss in market capitalisation is the clearest measure yet of the market’s anxiety about this unfolding economic aftershock.
This episode reveals the complex, delayed consequences of major economic interventions. A policy that was a solution a decade ago has now created a new problem. The market’s violent reaction on Friday suggests that cleaning up the aftershock of QE will be a contentious and potentially costly affair.