Trussonomics – UK economic prospects Under Liz Truss

Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng have endured a rocky start implementing their new vision for Britain’s economic policy – Trussonomics. In an Interview with Third Bridge Forum conducted days before the Chancellor’s mini budget (officially named The Growth Plan 2022), a senior fellow at the Adam Smith Institute told us how the “radical” new PM could use Trussonomics to get Britain’s economy growing by 2.5% a year.

Can Britain return to 2.5% GDP growth under Liz Truss?

The specialist envisages the pound devaluing further and staying depressed for at least the next six months. They told us such devaluation could lead to an “export boom”, but that it would not be instant. The specialist believes the new PM will act to review the Bank of England’s (BoE) remit this year in an effort to change the Solvency II ratio to increase UK investment. However, the PM and Chancellor are unlikely to intervene in the operational independence of the BoE to maintain confidence in the international capital markets, according to the specialist. 

The relaxing of such regulations were deemed by the specialist as important in helping Truss reach her 2.5% GDP growth – a target not reached since before the Global Financial Crisis. The specialist said the new government could relax MiFID regulations to “spur” more investment in high-tech and infrastructure segments of the UK economy. The government may also relax planning controls, in a similar vein to the former Chancellor and Tory leader candidate Rishi Sunak’s free-ports policy, we heard.

On the recently agreed energy package, the specialist said “no one” knows how much it will end up costing given the current uncertainty in gas and oil markets. However, they said it is likely to be revised to become more targeted if the situation deteriorates further. The specialist also thinks Truss’s appointment will signal a “bigger push” to diversify the UK’s energy policy. The new Business Secretary (Secretary of State for Business, Energy and Industrial Strategy) has said the UK “must get every cubic inch of gas out of the North Sea”, which the specialist has interpreted as a likely change to the environmental aspects of Britain’s energy policy.

Truss’s appointment as Prime Minister has coincided with economic turmoil. However, the specialist said that the markets could be overreacting to Truss’s policies. 

But time is of the essence for the new Prime Minister. They told us Truss is unlikely to call an election until the latest point possible – November 2024. This, the specialist said, will give her the best chance of demonstrating that her new “radical” policies work. 

Click here to access all the human insights in Third Bridge Forum’s “Trussonomics – UK Economic Prospects Under Liz Truss” Interview.