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Liz Truss urged to take immediate action on struggling UK economy

·Finance Reporter, Yahoo Finance UK
·4-min read
Liz Truss speaks after being announced as Britain's next Prime Minister at The Queen Elizabeth II Centre in London, Britain September 5, 2022. REUTERS/Hannah McKay
Liz Truss has won the Tory leadership . Photo: Hannah McKay/Reuters

UK firms want to see the new prime minister Liz Truss deliver support for businesses now in order to support the economy as a recession looms.

“She must now take immediate steps to support the economy. The last few months have been difficult for everyone, time is running out and urgent action is needed to deal with the costs’ crisis,” the chair of the British Chamber of Commerce, Sarah Howard, said.

“Like households, firms have been telling us of unsustainable rises in their energy bills and how difficult it is to find new fixed term contracts to buffer against further price hikes.

“Unless the new prime minister addresses these problems head-on then the economy will drift further into dangerous waters and the outlook for both businesses and consumers will be bleak indeed,” she added.

Read more: Kwasi Kwarteng set to become UK's first Black chancellor

The trade body is asking for regulator Ofgem to be given more power to strengthen regulation of the energy market for businesses and a temporary cut in VAT to 5% to reduce energy costs for firms, among other measures.

“The plan is not just about ensuring support for businesses. It is also about protecting jobs, securing livelihoods, and creating a vibrant and prosperous society,” Howard added.

On the topic of protecting jobs, the Trades Union Congress (TUC) has called on Liz Truss to “come clean” over her plans for workers’ rights.

“Liz Truss' number one priority should be to help families pay their bills this winter,” TUC general secretary Frances O’Grady said.

“Threatening hard-won workers’ rights is the last thing the country and working people need. She must come clean about her plans.”

It has been reported that Truss is looking to begin a review of EU-derived worker protections.

Truss, on Twitter, said she's "honoured to be elected leader".

Melanie Leech, chief executive at the British Property Federation, said the UK “urgently needs strong government leadership after a period of drift”.

“The new prime minister must address the immediate cost pressures facing businesses and families, but in parallel there must a clear focus on the longer-term objectives to tackle inequalities across the UK and transition to a greener, high-productivity economy,” Leech said.

Tony Danker, CBI director general, said Truss must support UK households and firms. “Most immediately, support for struggling households and firms in jeopardy is top of the in-tray.

"This may not be the pandemic, but the exceptional circumstances we now face mean government must play a central role in supporting our economy,” he said.

Inflation is soaring
Inflation is soaring

“And if we’re serious about getting the UK growing again, ensuring any slowdown is short and shallow, we need a serious plan for growth. It needs to be bold, unconventional and rooted in the very real opportunities that still exist for the UK to thrive.”

Read more: Liz Truss to be UK's next prime minister: what it means for your taxes, bills and savings

AJ Bell investment director Russ Mould warned that the gilt and currency markets could be the first real test for the new prime minister.

“Financial markets express their faith — or lack of it — in a country and its economic and political prospects through how much they charge it to borrow and how they value its currency. In each case traders and investors are already turning away, presumably because they do not like what they see.

“If Liz Truss can put an end to the sell-off in both the UK government bond market and sterling that would be a major coup, although the odds do seem to be stacked against them, as they juggle 40-year high inflation, the threat of a recession, an energy crisis, war in Ukraine, the weak pound, rising interest rates and the government’s own state of penury.

The pound is little changed, hovering around $1.15 against the dollar, on the news that Liz Truss will become the UK’s next prime minister.

Kate Nicholls, chief executive of UKHospitality, also called for Truss to act "quickly and decisively".

“The new government must act quickly and decisively to address the soaring energy bills that are facing consumers and businesses,” she said.

Energy bills continue to rise.
Energy bills continue to rise. Chart: Yahoo

“With the right package of support — including a reduction in the headline rate of VAT for the sector to 12.5%, a business rates holiday, the deferral of all environmental levies, the reinstatement of a HMRC Time to Pay scheme and the reintroduction of a trade credit insurance scheme for energy — the sector will be well placed to aid growth through generating jobs and local investment,” she added.

Liz Truss has reiterated her determination to tackle the energy crisis but once again, there is no actual detail.

Watch: Liz Truss wins race to become UK prime minister: ‘I will deliver’