Business leaders urge new PM Liz Truss to act swiftly to avert economic crisis

With infla­tion at 10.1%, ener­gy prices soar­ing, the UK on the brink of reces­sion and an ongo­ing war in Ukraine, Liz Truss faces an over­flow­ing inbox of crises to tack­le as she steps into Num­ber 10.

Truss beat Rishi Sunak to the post with vic­to­ry in the Con­ser­v­a­tive lead­er­ship race, although by a small­er mar­gin than many were expect­ing. She received 81,326 votes to Sunak’s 60,399, giv­ing her a 57% share.

Busi­ness groups now want to see the new prime min­is­ter act quick­ly to pro­tect small busi­ness­es, find a solu­tion to the ener­gy cri­sis and set the coun­try on a path to eco­nom­ic recov­ery. This is even more impor­tant as new fig­ures show the UK is on the brink of reces­sion, with data from the S&P Glob­al and Char­tered Insti­tute of Pro­cure­ment and Sup­ply (Cips) show­ing a decline in man­u­fac­tur­ing out­put in August and weak­er activ­i­ty in the ser­vices sec­tor.

The month­ly sur­vey of pur­chas­ing man­agers fell to 49.6 last month, from 52.1 in July. A fig­ure above 50 sug­gests pri­vate sec­tor activ­i­ty is increas­ing.

The Con­fed­er­a­tion of British Indus­try’s direc­tor gen­er­al, Tony Danker, accepts that it is an “extra­or­di­nar­i­ly dif­fi­cult time” to take over lead­er­ship of the coun­try but high­lights that the most press­ing con­cern is pro­vid­ing eco­nom­ic sup­port for “strug­gling house­holds and firms in jeop­ardy”.

He adds: “This may not be the pan­dem­ic, but the excep­tion­al cir­cum­stances we now face mean gov­ern­ment must play a cen­tral role in sup­port­ing our econ­o­my.”

Any plan for growth must be “bold, uncon­ven­tion­al and root­ed in the very real oppor­tu­ni­ties that still exist for the UK to thrive”, accord­ing to Danker.

Tax cuts to come?

Last week, The British Cham­bers of Com­merce (BCC) pre­dict­ed that the UK econ­o­my will enter a reces­sion this year. It called on the gov­ern­ment to intro­duce an emer­gency grant to help busi­ness­es with ener­gy costs, a tem­po­rary cut in VAT on ener­gy bills to 5% and a rever­sal of the increase in nation­al insur­ance con­tri­bu­tions.

On the announce­ment of Truss as the new prime min­is­ter, chair of the BCC Sarah Howard says: “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, the econ­o­my will drift fur­ther into dan­ger­ous waters and the out­look for both busi­ness­es and con­sumers will be bleak indeed.”

In her vic­to­ry speech, Truss reit­er­at­ed her inten­tions to cut tax­es and grow the econ­o­my – a move that has been wel­comed by busi­ness groups that are see­ing the out­go­ing costs of their mem­bers soar. The Fed­er­a­tion of Small Busi­ness­es, which rep­re­sents the 5.5 mil­lion SMEs that make up 99% of the UK econ­o­my, says its mem­bers are fac­ing “soar­ing ener­gy costs, sky-high tax­es, ram­pant infla­tion and sup­ply chain dis­rup­tion”.

The organisation’s nation­al chair, Mar­tin McTague, says: “Small busi­ness­es are cry­ing out for a com­pre­hen­sive response that cuts tax­es, lim­its spi­ralling bills and pro­vides direct cash sup­port for the small­est busi­ness­es.”

He is also call­ing for Truss to reverse the recent hike in nation­al insur­ance and for her to explore ways to stop small firms hav­ing to pay busi­ness rates.

UK cor­po­ra­tion tax cur­rent­ly stands at 19% – low­er than the OECD Euro­pean aver­age of 21.7% – and had been planned to rise to 25% from 1 April 2023, in line with France and Spain.

Preventing a ‘bonfire’ of workers rights

Address­ing the cost-of-liv­ing cri­sis, which is affect­ing both indi­vid­u­als and busi­ness­es, was also list­ed as an imme­di­ate pri­or­i­ty by the Char­tered Insti­tute of Per­son­nel and Devel­op­ment. 

How­ev­er, it also sought to warn Truss of tin­ker­ing with work­ers rights, after it emerged that she was con­sid­er­ing a review of the 48-hour work week, orig­i­nal­ly adopt­ed as part of the EU work­ing time direc­tive. It’s believed that cur­rent rules around work breaks and hol­i­day pay could also be amend­ed in a bid to make the UK more pro­duc­tive and com­pet­i­tive.

Ben Will­mott, its head of pub­lic pol­i­cy, says: “The new gov­ern­ment should strong­ly resist any temp­ta­tion to water down employ­ment rights and pro­tec­tions for work­ers. The UK is already one of the most light­ly reg­u­lat­ed labour mar­kets among devel­oped economies, with above-aver­age employ­ment lev­els and a high pro­por­tion of work­ers in per­ma­nent employ­ment.  

“Busi­ness sur­veys con­sis­tent­ly show that the UK’s SMEs don’t see employ­ment reg­u­la­tion as a sig­nif­i­cant imped­i­ment to growth, which strong­ly sug­gests that any push to dereg­u­late in this area would be an unnec­es­sary and poten­tial­ly dam­ag­ing dis­trac­tion.”

Instead, he sug­gests that the new cab­i­net should focus on “deliv­er­ing on pre­vi­ous com­mit­ments to reform labour mar­ket enforce­ment and sup­port the cre­ation of more flex­i­ble work­places” to raise employ­ment stan­dards and cre­ate more bet­ter-qual­i­ty jobs.

It has also been sug­gest­ed that Truss will seek to make changes to UK trade union laws, which would raise the thresh­old for the num­ber of votes need­ed for indus­tri­al action to go ahead.

Cur­rent rules mean bal­lots on indus­tri­al action need at least a 50% turnout for the strike to be legal, while work­ers who deliv­er “impor­tant pub­lic ser­vices” must also reach a 40% vote thresh­old among all work­ers for a strike to take place.

Sharon Gra­ham, gen­er­al sec­re­tary of Unite the Union, the sec­ond largest trade union in the UK, says: “At a time when we face a nation­al pay cut, the prime min­is­ter should be tak­ing on the cor­po­rate prof­i­teers that are push­ing up prices, not work­ers fight­ing to stand still. 

“Attempts to place effec­tive indus­tri­al action out­side of the law are a direct assault on the demo­c­ra­t­ic rights of the British peo­ple and will be met with fierce, pro­longed resis­tance.”

Irre­spec­tive of their pref­er­ence of suc­ces­sor to Boris John­son, many busi­ness lead­ers will sim­ply be hap­py to see a leader at the top of gov­ern­ment after a pro­longed lead­er­ship con­test.

The Insti­tute of Direc­tors direc­tor gen­er­al Jonathan Gel­dart says: “With busi­ness­es fac­ing real dif­fi­cul­ties and feel­ing appre­hen­sive about the prospects for the UK macro­econ­o­my, our mem­bers have expressed their con­cern about the lack of a clear direc­tion. Our data shows that one of the main rea­sons for low busi­ness con­fi­dence in the UK econ­o­my is polit­i­cal insta­bil­i­ty, sec­ond only to infla­tion.”

 He now hopes that today’s deci­sion rep­re­sents the end of the recent polit­i­cal uncer­tain­ty.