Your Sunday UK Briefing: Trussonomics Is Over Before It Began

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(Bloomberg) — Hello again.Here are a few snippets to ease you into what promises to be yet another lively week in UK politics and markets.

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The big U-turn: The Truss honeymoon is over before it even began. The UK starts the week with its fourth Chancellor in less than a year. Liz Truss sacked Kwasi Kwarteng on Friday — who served just 38 days — after their mini-budget roiled markets and tanked support for the Conservative party. Truss’s rocky start led the Economist magazine to declare that her premiership would have the shelf life of a head of lettuce and the country’s fiscal mess became the butt of jokes at the IMF meeting in Washington. 

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Jeremy Hunt, her new finance minister, went on television this weekend to announce the death of Trussonomics — reversing more of her unfunded tax cuts and saying the government would rein in spending and consider boosting some taxes to balance the books. Bank of England Governor Andrew Bailey said Saturday that Truss had been “flying blind” with her initial plan, but that he and Hunt were of the same mind. 

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The big stat: The UK inflation rate is expected to rise to 10% in September, just shy of July’s 40-year high of 10.1%. Surging food and energy prices have led to a cost-of-living crisis, with thousands of Britons fearing they will have to choose between heating and eating this winter. The report will likely pile pressure on the Bank of England to raise its benchmark rate by at least 0.75% next month. 

The big market thought: Markets will likely issue their verdict on whether Truss’s volte-face will be enough to restore confidence in the pound and in UK government bonds. Yields rose on Friday after Truss’s brief afternoon press conference when she refused to answer questions  about whether she should also resign. Hunt’s solid performance this weekend and Bailey’s endorsement, may help calm market jitters, though there were reports Sunday that senior Tories will meet this week to form a plan to oust Truss, meaning the political turmoil may not be over yet. 

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The big delay:  UK property buyers worried about the surge in mortgage rates have a new headache to deal with. Home purchases are now taking almost five months to complete. That’s putting buyers at risk of losing home loan offers made before rates surged because they are only valid for six months.

The big opinion: Liz Truss’s fate now lies in that hands of her smooth-talking chancellor, Martin Ivens argues in Bloomberg Opinion. Hunt will command some respect among his parliamentary colleagues for his seniority and experience, but he may just have mere days in which to make his mark. It’s not mission impossible, but unless he calms the storm, his own term of office could prove as truncated as that of Truss, Ivens writes. 

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The big game: England got off to a strong start in the Rugby League World Cup, with a 60 to 6 thrashing of Samoa in their opening match. England is hosting the competition, delayed from last year when Australia and New Zealand refused to travel to the UK because of Covid. England next faces France on Saturday.  

ICYM our Big Take:  Londoners used to endure some of the worst air quality in the developed world, but some of the toughest restrictions on heavily polluting cars anywhere helped reverse that and flip a switch on the adoption of electric vehicles. Since implementation three years ago, the restrictions drivers of diesel and gasoline cars pay as much as £27.50 to enter the city center. The number of licensed fully electric vehicles has increased more than fourfold in that period, while diesel cars have dropped more than a quarter. 

And finally, if this past week makes you long for an alternative reality, listen to the BusinessWeek podcast and an interview with Herman Narula, discussing his new book Virtual Reality,  a look at how the Metaverse could expand the frontiers of human experience. 

Have a good week. See you on the other side.