Truss’s flop carries price tag for British economy: Report

Britain's GDP is likely to be about 2 per cent smaller next year compared to projected results before then PM Liz Truss unveiled tax cuts. PHOTO: EPA-EFE

LONDON – Prime Minister Liz Truss’s brief time in office will carry a sizeable price tag for the British economy, according to Bloomberg Economics.

Gross domestic product is likely to be about 2 per cent smaller next year relative to the forecast before her government unveiled controversial tax cuts on Sept 23, new projections released on Monday show.

That leaves the economy on track for a contraction of 1.4 per cent in 2023, compared to 0.5 per cent growth predicted in early September.

Counting the Cost of Truss

“Both monetary and fiscal policy are set to be tightened in unison as the UK attempts to regain credibility with financial markets,” economists Dan Hanson, Jamie Rush, and Ana Andrade wrote in their report. “The result looks likely to be a recession similar to the one experienced in the 1990s.”

Peak pain will be in the second quarter of next year, they said. At that point Truss’s failed plan is likely to have reduced GDP by 1.5 per cent.

Adding to the strain, Bloomberg Economics sees inflation spiking to 12 per cent in April, forcing the Bank of England to hike its key interest rate to a peak of 4.25 per cent by next May from 2.25 per cent now. BLOOMBERG

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