Pound sinks against euro and dollar as tax rises loom and growth slows

Prospect of a tough budget is thought to have brought forward the likely date for a cut in interest rates to 3.75%

The threat of higher taxes in next month's budget and concerns about slowing economic growth pushed the pound to its lowest level against the euro in more than two and a half years at one point on Wednesday.

Sterling also slumped against the dollar as traders digested news that Rachel Reeves will need to fill a larger hole in the public finances when she puts together her budget plan, after a bigger-than-expected downgrade to the UK's productivity outlook.