Wealth Strategies
Liz Truss – The New UK Prime Minister: Wealth Managers' Reactions

The UK has a new leader of the Conservative Party, and new Prime Minister in Liz Truss. She has a very full in-tray of challenges to confront. Energy prices, the Northern Ireland border issue and the state of the NHS are just three of the more urgent questions.
Liz Truss has won leadership of the Conservative Party, and hence is now Prime Minister, taking over from Boris Johnson who was ousted in the summer after months of unhappiness about his performance in office. Truss faces formidable challenges: skyrocketing energy prices and high inflation; a dysfunctional National Health Service; a significant immigration influx across the English Channel; the highest tax burden since the early 1950s and the Northern Ireland border/European Union issue. That said, the opposition Labour Party, while it has moved ahead in the polls, still has to overturn a large Conservative majority at the next election, which needs to be held by 2024.
Truss has talked in her campaign about the need to cut taxes and foster enterprise, which ought to be standard fare for a Tory but this has prompted concerns about rising public debt. Truss and her allies have made the “supply side” argument contending that lower taxes stimulate growth, although it remains arguable whether tax cuts at a certain point can pay for themselves.
Here is a list of wealth managers’ reactions.
Samuel Mather-Holgate, independent financial advisor at
Mather and Murray Financial
Truss has a huge to-do list. She will want to get over to Ukraine
and show her support there as well as making calls to Biden and
the EU as the Northern Ireland Protocol will probably dominate
her tenure. However, the cost of energy will be her number one
priority. It will be interesting to see who Truss surrounds
herself with in cabinet. The chancellor will be a massive
appointment for someone, and we all think it will be Javid. What
will he do to support households? I think the £400 ($460.7)
direct payment on bills will be doubled.
Graham Cox, director at
SelfEmployedMortgageHub.com
Liz Truss has certainly got her work cut out. I think she's
broadly got the right idea that taxes need to be cut. We
can't tax our way out of our debt mountain, we need to
aggressively grow the economy. That means raising personal tax
allowances, lowering income tax and reversing increases to
National Insurance and corporation tax. The elephant in the room
is corporate offshore tax evasion. We could transform the economy
and living standards if we were to finally get serious about
confronting this issue, rather than enabling it. In the
short-term, Truss must address the cost-of-living crisis. An
energy cap freeze appears to be the only way out because we just
don't know how expensive energy will become, or for how long.
Philip Dragoumis, director, and owner at Thera Wealth
Management
It will be impossible for Truss to keep all her commitments to
cut taxes while at the same time announcing a government package
at least as big as (if not bigger) than the one announced by Keir
Starmer to help people deal with the rise in energy costs. The UK
government bond market has recently been very concerned that
Truss's government will be fiscally irresponsible and blow a hole
in the public finances. The 10-year government borrowing costs
have soared to almost 3 per cent from 1.6 per cent in
July. We need some immediate clarity on the support package but
also a clear pledge that finances will not be derailed, otherwise
borrowing costs will spiral out of control.
Schroders UK equities specialists, Sue Noffke, Andy
Brough, and Jean Roche
UK households face an income squeeze on multiple fronts in coming
months. Double-digit inflation is expected by the end of 2022,
alongside double-digit falls in discretionary spending, as the
near doubling of wholesale gas prices since May 2022 feeds
through into the retail energy prices paid by UK households. The
median UK household income (after tax) is £31,400: a £1,500 rise
in energy bills for the typical household amounts to around 5 per
cent of annual income. The rise in mortgage costs
look likely to be of a similar magnitude.
So far in 2022 household disposable income has grown due to a
buoyant labour market and the drawing down of savings built up
during Covid lockdowns. The income tracker from grocery chain
ASDA (which started in 2011) shows a year-on-year decline for
July 2022 of 16.5 per cent in UK household income (excluding
bonuses) after tax and spending on essential items. This is
equivalent to a loss of £40 per week. This is likely to fall much
further.
The savings built during the pandemic – estimated at £190 billion
– are not equally spread amongst households. Lower-income
households typically have limited or no savings, and the poorest
households will feel the squeeze more acutely than middle or
higher-income households. Almost a quarter of all households have
no savings and a further 9 per cent have savings of £250 or
less. With inflation likely to exceed the 13 per cent peak
forecast by the Bank of England (BoE), workers will be no better
off by mid-2023 than they were 20 years earlier (according to
research by the Resolution Foundation).
Chris Beauchamp, chief market analyst at IG Group, the
trading platform
Policy-wise, she has to provide the grip on the energy crisis
that has been lacking over the summer. But she will face a
brewing row with the EU over Northern Ireland and must cope with
these issues while grappling with a rancorous Tory party, with
only a third of the party having backed her. She thus finds
herself at risk of exposing her flanks to a leadership challenge,
either on the basis of going soft on Brexit or of failing to sort
the energy crisis. It will be a short honeymoon period.
Markets-wise, there has been little reaction since the
announcement was very much a foregone conclusion. But with the
pound wallowing against the dollar, it is clear that markets are
none too optimistic about the outlook for the UK. Perhaps a big
enough programme of support might win her a reprieve, but
investors will be watching closely.