Business leaders have reacted with anger and dismay to the political crisis in the UK, saying a replacement for Lease Truss must act quickly to stabilize the crisis-hit economy.
The prime minister announced her resignation on Thursday afternoon after just 45 days in office, leaving uncertainty over government policy issues such as tax rates for businesses and the future rate of energy subsidies.
Industry chiefs have unanimously condemned recent political unrest as economists predict a long-term recession that has led to a halt in investment in the UK.
Tony Danker, director general of the Confederation of British Industry, Britain’s largest business lobby group, said half of companies considering investing believed they would wait until the situation calmed down.
“The politics of recent weeks have undermined the confidence of people, businesses, markets and global investors in Britain,” he said. That must end now if we are to avoid further damage to families and businesses.
“Stability is key. The next prime minister must act to restore confidence from day one. He must come up with a credible medium-term fiscal plan and a long-term growth plan for our economy as soon as possible.
Paul Drechler, chief executive of London-based business LDN, said the UK was in a political and economic crisis and the government needed a “rock-solid” cabinet and a new leader.
However, he opposed snap elections, arguing that it would add to weeks of government paralysis. “We don’t need more Cirque du Soleil,” Drechsler said. “We don’t need any more circuses, theaters, any more shenanigans. Just do your job.”
He added that the recent upheaval had seriously damaged the UK’s international credibility.
The political climate is expected to directly affect businesses’ finances, with interest rates rising sharply for companies trying to recover from the Covid-19 pandemic lockdowns.
UK borrowing costs have risen since Truss and former chancellor Kwasi Kwarteng announced billions of pounds in tax cuts in late September without outlining a long-term fiscal plan. Successive Chancellor Jeremy Hunt is due to make a statement on the government’s medium-term budget plan on October 31 as he tries to calm financial markets.
Market reaction to the cushion release was muted on Thursday afternoon. The pound rose 0.4% to $1.1268 against the dollar, while the FTSE 100 added 0.2% to 6,942. Government bond markets were roughly flat.
Wholesale energy costs have fallen sharply in recent weeks but many industries are concerned about how they will cope when state support for energy bills ends at the end of March. The government has promised to review which industries will receive support after this point.
Tina McKenzie, chair of policy and advocacy at the Federation of Small Businesses, said companies should be aware they face a “cliff” in April.
“The transition from political turmoil to economic turmoil makes it difficult for small businesses to operate, and rapidly changing policy decisions make planning more difficult than it needs to be,” she said.
“The prospect of interest rates continuing to rise is causing sleepless nights for small businesses facing higher borrowing costs, just as the cost of everything from electricity to eggs is rising.”
Kitty Usher, chief economist at the Institute of Directors, a lobby group, said: “Confidence in the UK economy – which according to our data has been at very low levels – is taking a further hit as a direct result of political uncertainty. In the UK government. This reduces investment, thereby limiting growth. Without stability and confidence, growth is impossible.
