Investor trust in Britain on the edge after 7% drop in sterling in last three months, poll finds 

More than half — 55% — of international banks and research consultancies polled by Reuters said there was a high risk that confidence in British assets would deteriorate sharply in the coming three months

Reuters poll: 'Trust is fleeting... and Truss would be wise to reassure markets that she has a plan to pay for these expenditures.'

Investor confidence in British assets sits on the edge of a precipice as its new chancellor of the exchequer Kwasi Kwarteng readies his first fiscal update, a Reuters poll of bond strategists and economists showed. 

Mr Kwarteng is due on Friday to outline his plans to support households and businesses through the coming winter, an event investors say will be a critical test of confidence in Britain's economy and public finances.

Slightly more than half — 55% — of the international banks and research consultancies polled by Reuters said there was a high risk that confidence in British assets would deteriorate sharply in the coming three months.

Fifteen out of 29 respondents said the risk was high, including three primary dealers of British government bonds. One said the risk was very high. The remaining 13 said the risk was low.

While currencies all over the world have fallen against a surging dollar and rising inflation has hammered government bonds prices everywhere, Britain has suffered worse than most.

Sterling lost 7% of its value against the dollar in the last three months, one of the worst performers of 10 major currencies.

Ten-year government bond prices have fallen much further in Britain over the same period than in France, Germany, Italy and the US — something that cannot be explained away by currency movements alone.

These shifts in part reflect investors' worry that Britain's reliance on imported energy will leave it exposed to higher inflation for longer.

But there are also doubts about the economic agenda of new prime minister Liz Truss, who has announced a hugely expensive plan to subsidise energy bills in combination with tax cuts — policies which have yet to be costed.

"Trust is fleeting... and Truss would be wise to reassure markets that she has a plan to pay for these expenditures," said Rabobank strategist Bas Van Geffen

Mr Kwarteng has defended the new government's plans, saying Britain has more room to borrow than other countries that have a higher share of public debt to economic output. 

Kick-starting growth is the best way to get stronger tax revenues which will restore the public finances over the medium term, he said — although some economists warn this approach recalls the ill-fated, inflationary policies of the 1970s. 

• Reuters