Business leaders, angry and frustrated by Britain’s political chaos, have called for Liz Truss’ replacement to act quickly to stabilize the crisis-hit economy.
The prime minister announced his resignation on Thursday afternoon after just 45 days in office, leaving businesses uncertain about the government’s plans on policy issues such as how much tax they will pay and the extent of future energy subsidies.
Industry bosses have been almost unanimous in condemning the recent political turmoil, which they say has stalled investment in Britain as economists predict a prolonged recession.
Tony Danker, director-general of the Confederation of British Industry, Britain’s largest business lobby group, said he believed half of the companies considering investing would wait until the situation stabilized.
“The politics of recent weeks have shaken the confidence of people, businesses, markets and global investors in the UK,” Danke said. “This must end now if we are to avoid further harm to families and businesses.
When Truss and her first prime minister, Kwasi Kwarteng, announced their “growth plan” on September 23, Danker hailed it as “a turning point for our economy”.
However, the small budget quickly sparked market turmoil that eventually led to the collapse of Truss, and Danker said the new prime minister’s priority now must be “to develop a solid medium-term fiscal plan and a long-term growth plan as soon as possible”. our economy”.
Paul Drechsler, chief executive of BusinessLDN, a group representing London-based companies, said the UK was in the midst of an “irresolvable political and economic crisis” and the government needed a “rock solid” cabinet and a new leader.
However, he opposed an immediate general election, which could paralyze the government for weeks. “We don’t need more Cirque du Soleil,” Drexler said. “We don’t want more circuses, theaters and pranks. Just do your job.”
He added that the recent unrest had seriously damaged the UK’s international credibility.
Helena Morrissey, chairman of the board of the investment platform AJ Bell, said her initial reaction after “the carnage of the past six weeks” was “relief.”
The Conservative colleague, who once backed the leadership of former prime minister Rishi Sunak, said business leaders needed a “stable prime minister who understands the market”.
“Whoever gets elected will need to take a step back and develop a proper, well-thought-out plan to gradually rebuild confidence,” she said.
The political situation is expected to directly impact the financial health of businesses, with higher interest rates raising debt servicing costs for companies still struggling to recover from the Covid-19 pandemic lockdown.
UK borrowing costs soared after Truss and Kwarteng announced billions of pounds of tax cuts at the end of September, without elaborating on long-term fiscal plans. Treasury sources insisted that the government would move forward with its scheduled plan to hold a debt relief announcement on October 31, but any final decision would rest with the incoming prime minister.
The market’s reaction to Trus’ resignation was muted on Thursday. GBP/USD briefly rose above $1.13 on Thursday afternoon before retreating to gain 0.3% on the day. The FTSE 100 closed up 0.3 percent at 6,943.91. The government bond market was broadly flat.
Wholesale energy costs have fallen sharply in recent weeks, but many industries remain deeply concerned about how they will respond once state support for companies’ energy bills runs out at the end of March. The government has pledged to review which industries will receive support after that.
Tina McKenzie, policy and advocacy chair for the Federation of Small Businesses, said companies need to know if they will face a “cliff edge” in energy costs in April.
“Political turmoil leads to economic turmoil, making it harder for small businesses to operate, and rapidly changing policy decisions make planning much more difficult than it needs to be,” she said.
“The prospect of higher interest rates is keeping small business owners awake at night facing higher borrowing costs, while prices for everything from electricity to eggs continue to climb.”
Kitty Ussher, chief economist at the Association of Directors, a lobbying group, said: “Confidence in the UK economy – according to our data – has been hit further by political instability, according to our data. . In the UK government. This reduces investment, which limits growth. Growth is impossible without stability and confidence.”