Businesses demand action after PM quits

Business leaders and economists emphasised the need for new policies to reinvigorate the UK economy in the wake of the resignation of Prime Minister Boris Johnson.

Businesses demand action after PM quits

06/07/2022. London, United Kingdom. The |Prime Minister Boris Johnson leaves Number 10 for prime Minister's Questions. 10 Downing Street. Picture by Tim Hammond / No 10 Downing Street

Mr Johnson resigned on Thursday afternoon after losing the backing of many of his own ministers and Conservative MPs over his handling of a series of scandals and two recent by-election defeats. His successor is unlikely to be in place until summer's end.

Stephen Phipson, chief executive of the manufacturers' organisation Make UK, paid tribute to the way Mr Johnson had reacted to the Covid-19 pandemic and to his support for Ukraine.

But he added: "Moving forward the country faces considerable societal challenges in the short and long term to which manufacturing will play a pivotal role in addressing, especially in areas of the UK that need levelling up.

“It is now vital that whoever succeeds him works in partnership with industry to develop a long term economic vision which has an all-encompassing industrial strategy at its heart. This is essential if we are to boost growth, drive innovation and create the high quality, highly skilled jobs the economy urgently needs.”

Both Make UK and the British Chambers of Commerce (BCC), are urging the new government, and whoever leads it, to cut VAT on energy bills and to take action to address labour shortages.

Shevaun Haviland, director-general of the BCC, said she hoped Mr Johnson's resignation would finally bring the current period of political instability to an end.

“Action is needed quickly to help business," she said. "We’re on limited time and the government must reset, rethink and get their house in order and swiftly demonstrate that it is on the side of business if confidence is to be restored.”

Tony Danker, director-general of the Confederation of British Industry (CBI), also said the political vacuum following Mr Johnson's resignation needed to be filled as quickly as possible "to protect people’s living standards, through action on business confidence, investment and growth".

He added: “Getting the economy growing again has got to be the number one focus for all politicians, and I look forward to working with the government on a plan for a better, brighter economic future for people right across the United Kingdom.”

James Penny, chief investment officer at TAM Asset Management, said he believed UK companies could benefit from the appointment of a new prime minister.

"It’s likely his successor will have a softer stance on Europe and Brexit negotiations, boosting positivity for UK domestic businesses found in the mid- and small-cap space which have been battered of late," he said.

"This could be further boosted if the successor manages to right the UK ship and thus stabilise the pound. The UK economy will always respond positively to a firm hand on the tiller of the country, so this is only a benefit for the economy and its prospects as we head into a time of economic contraction."

Walid Koudmani, chief market analyst at financial brokerage XTB, believed the City of London would "breathe a sigh of relief" that the uncertainty surrounding Mr Johnson's future had finally been settled.

He pointed out that the pound had gained against both the dollar and euro when it emerged the prime minister was to quit, but he warned that Mr Johnson’s successor faced a "massive" challenge.

"The pound remains severely weak due to the dire state of the UK economy, which is underperforming its peers (and) likely to enter into a recession while the Bank of England refuses to hike interest rates aggressively to deal with the escalating inflation," he said.

Naeem Aslam, chief market analyst at Avatrade, also pointed to the fact that sterling had recovered some of its recent losses when Mr Johnson announced his departure.

"There is no doubt that Boris Johnson has failed the public on many occasions and the fact that he will be leaving is helping the currency and FTSE 100 for now," he said.

"However, political uncertainty has increased as a large number of political cards will come into play, where the new prime minister may try to persuade public by adopting more loose fiscal policy, which could make the Bank of England’s job even more difficult."
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Read more news and views from David Sapsted, July articles.

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