Rishi Sunak needs to act to restore market confidence 'from day one', CBI warns

Tony Danker, director-general of the CBI, which represents 190,000 firms, said that the new Prime Minister must deliver a credible plan for the economy “as soon as possible”.

“The politics of recent weeks have undermined the confidence of people, businesses, markets and global investors in Britain,” he said.

That must now come to an end if we are to avoid yet more harm to households and firms

“Stability is key. The next prime minister will need to act to restore confidence from day one.

“They will need to deliver a credible fiscal plan for the medium term as soon as possible, and a plan for the long-term growth of our economy.”

It comes as the Prime Minister’s official spokesperson yesterday confirmed that work on the Chancellor’s medium term fiscal plan had not yet been completed, and that it was up to the next prime minister as to when it is published, leaving open the possibility of a delay.

The Bank of England confirmed that it is currently “engaging” with the Treasury over its fiscal event which is scheduled for Halloween.

Sir Dave Ramsden, the Bank’s deputy governor, yesterday told MPs that the recent improvement in the markets had shown that credibility was returning to British economic policy.

In response to whether the Bank has been briefed about the October 31 announcements by the Treasury, Mr Ramsden said: “Yes, we have.

“We haven’t started the Monetary Policy Committee (MPC) round yet which is one reason why I’m able to be here, but we have started putting the forecast together and we are already engaging with Treasury officials who are in turn engaging with the OBR on the elements which will go into the October 31 announcement,” he said.

“A particularly important thing I’ve stressed, and Sir Jon Cunliffe stressed last week, is what the new energy price guarantee will look like.”

Last week, Jeremy Hunt said universal energy support for households, which has capped bills for a typical household to £2,500 a year, will end after six months and then be replaced by more targeted support.

This comes as the UK’s economic downturn worsened in October as growth in the private sector slowed to a 21-month low, after output declined for the third month running following the period of political turbulence.

Meanwhile, business activity across the services sector, which includes hospitality like restaurants and pubs, declined for the first time in 20 months and at the fastest pace since January 2021.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said “The heightened political and economic uncertainty has caused business activity to fall at a rate not seen since the global financial crisis in 2009 if pandemic lockdown months are excluded.

“Gross domestic product (GDP) therefore looks certain to fall in the fourth quarter after a likely third quarter contraction, meaning the UK is in recession.

“Business confidence has, meanwhile, collapsed, sliding to a level rarely seen before in 25 years of survey history, meaning companies are becoming increasingly nervous about the outlook.”