Economy

Shortest-serving PM in UK history leaves scars on economy


LONDON – Liz Truss’ attempt to boost growth in a recession-threatened economy was fuelled by eye-watering levels of debt, damaging her government’s credibility on financial markets.

Truss, the shortest serving prime minister in UK history, leaves lasting scars on the economy after her botched budget rocked markets, spiked borrowing costs and tanked the pound.

The crisis-hit PM, elected Conservative leader just six weeks ago on a tax-slashing platform, announced her resignation on Thursday.

Her budget, peppered with tax cuts and delivered last month, sought to boost growth in Britain’s recession-threatened economy and freeze energy prices to ease a cost of living crisis.

Truss gamble backfires

However, the costly measures were fuelled by eye-watering levels of debt that damaged the government’s credibility on public finances and sent bond yields and mortgage rates soaring.

“The great political gamble of Liz Truss has spectacularly backfired but not before wreaking significant damage to the UK economy,” remarked Susannah Streeter, analyst at stockbroker Hargreaves Lansdown.

“It will take considerable time before the risk premium attached to UK assets fades away, following the financial nervous breakdown which followed the mini-budget.”

The measures triggered a loss of confidence on markets, ultimately sparking the downfall of the 47-year-old Oxford-born politician.

Investors also felt the budget splurge was in opposition to the Bank of England’s (BoE’s) recent interest rate hikes which sought to bring down runaway inflation.

“The politics of recent weeks have undermined the confidence of people, businesses, markets and global investors in Britain. That must now come to an end if we are to avoid yet more harm to households and firms,” said Mr Tony Danker, head of the CBI business lobby.

Markets, meanwhile, a breathed sigh of relief after Truss’ resignation. Sterling advanced beyond US$1.13 in afternoon deals, while the government’s 30-year bond yield declined to 3.94 per cent.

It had surged to more than 5 per cent, or the highest level in two decades, in the aftermath of the budget.

Nail in coffin

Truss faced a final humiliation late on Wednesday when a parliament vote on banning fracking descended into mayhem, delivering the final nail in the coffin of her premiership.

Her departure comes amid Britain’s intensifying cost-of-living crisis with inflation currently running at a 40-year high, fuelled by rampant food prices and soaring fuel bills.



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