London Daily

Focus on the big picture.
Tuesday, Oct 28, 2025

Truss toils to stop UK market turmoil from turning into economic tailspin

Truss toils to stop UK market turmoil from turning into economic tailspin

Liz Truss faced her first Prime Minister's Questions in parliament on Wednesday since her government's mini-budget sent markets into turmoil, borrowing costs rising, and ratings plunging in a disastrous first month in office.
It comes amid more bad news on the financial and economic fronts despite government efforts — and U-turns — to try to halt the slide since Chancellor (finance minister) Kwasi Kwarteng announced his plan for unfunded tax cuts.

The pound fell again against the dollar early on Wednesday after the Bank of England said it would not extend its debt-buying intervention to stabilize financial markets.

Meanwhile, official figures show the UK economy shrank unexpectedly in August, reinforcing fears of an impending recession.

As the government struggles to steady the listing ship, the UK's international reputation has taken a hammering. Investors are wary and the International Monetary Fund (IMF) has repeated rebukes for fiscal mismanagement.

Wednesday's report by the Office for National Statistics (ONS) shows there was a 0.3% fall in Gross Domestic Product (GDP) in August from the previous month, while July's increase in output was revised down to 0.1% from a previous estimate of 0.2%.

A decline in manufacturing caused production to fall, while services also slumped.

"Many other consumer-facing services struggled, with retail, hairdressers and hotels all faring relatively poorly," ONS Chief Economist Grant Fitzner said.

Some analysts say the figures show the rapid increase in prices is having an impact on consumer spending, compounding the cost-of-living crisis. A further sharp slowdown is expected as surging inflation hits households and rising interest rates put mortgages up.

The Bank of England (BoE) confirmed on Wednesday that it would stop supporting the bond market on Friday — having intervened to bring stability and support pension funds in the wake of the mini-budget. Governor Andrew Bailey said on Tuesday that pension funds now had to manage their own affairs and "sort it out".

However, there have been signs of mixed messages from the BoE, with the Financial Times reporting that its buying program could continue depending on market conditions.

This week's disclosure of the lowest unemployment rate since 1974 offered cold comfort, revealing a record exodus of people from the labor market and raising fears that the shrinking workforce will further fuel inflation.

The government's economic plan sparked market upheaval amid serious concerns over how it would fund the tax cuts, given its other obligations including a commitment to a massive energy support program.

The turmoil has prompted Liz Truss' government to take emergency action to plug the holes in public finances and stabilize the markets.

Late on Tuesday, it said that renewable power companies in England and Wales would face what has been described as a windfall tax from early next year.

On Monday the Chancellor said he would release the government’s detailed fiscal plans on Oct. 31, three weeks earlier than scheduled. This follows an earlier move to ditch a plan to scrap the top 45% rate of income tax.

The government's failure to detail how it will pay for its tax cuts — except to say faster economic growth will increase tax revenue — has been blamed for the rollercoaster ride on the markets.

Truss told the House of Commons on Wednesday that she would not cut public spending, but the government would make sure that public money was spent well.

Business Secretary Jacob Rees-Mogg caused astonishment on Wednesday morning by blaming the recent turmoil on interest rates, not the government's mini-budget. He also refused to accept that the action taken on renewable energy amounts to a windfall tax — prompting withering criticism from the opposition Labour Party.

"Such ludicrous evasion simply further erodes confidence in a government that looks like it is totally clueless," tweeted Labour's climate spokesman Ed Miliband.

Truss took office promising a radical shake-up of economic policy and challenging establishment orthodoxy. She told last week's Conservative Party conference that she would prioritize "growth, growth, growth".

At the outset, she promised to do this through tax cuts and deregulation.

But the market and economic turmoil has brought a series of U-turns and massively reduced the government's room for maneuver.

Some of the strongest criticism has come from Truss' own backbench MPs, a majority of whom did not support her in the summer leadership contest.

Many believe her economic ultra-liberalism is at odds with the Conservatives' 2019 manifesto pledges under previous leader Boris Johnson to "level up" Britain's poorer areas.

Leading voices spoke up against the tax-cutting plan, and the prime minister's refusal to commit to increasing benefits in line with inflation has brought rumblings of further rebellion.

Opinion polls have given Labour a lead of over 30 percentage points, and the latest YouGov assessment puts the government's public approval rating at only 13%, with 70% expressing disapproval of its performance.
Newsletter

Related Articles

0:00
0:00
Close
Soap legend Tony Adams, long-time star of Crossroads, dies at 84
Rachel Reeves Signals Tax Increases Ahead of November Budget Amid £20-50 Billion Fiscal Gap
NatWest Past Gains of 314% Spotlight Opportunity — But Some Key Risks Remain
UK Launches ‘Golden Age’ of Nuclear with £38 Billion Sizewell C Approval
UK Announces £1.08 Billion Budget for Offshore Wind Auction to Boost 2030 Capacity
UK Seeks Steel Alliance with EU and US to Counter China’s Over-Capacity
UK Struggles to Balance China as Both Strategic Threat and Valued Trading Partner
Argentina’s Markets Surge as Milei’s Party Secures Major Win
British Journalist Sami Hamdi Detained by U.S. Authorities After Visa Revocation Amid Israel-Gaza Commentary
King Charles Unveils UK’s First LGBT+ Armed Forces Memorial at National Memorial Arboretum
At ninety-two and re-elected: Paul Biya secures eighth term in Cameroon amid unrest
Racist Incidents Against UK Nurses Surge by 55%
UK Chancellor Rachel Reeves Cites Shared Concerns With Trump Administration as Foundation for Early US-UK Trade Deal
Essentra plc: A Closer Look at a UK ‘Penny Stock’ Opportunity Amid Market Weakness
U.S. and China Near Deal to Avert Rare-Earth Export Controls Ahead of Trump-Xi Summit
Justin time: Justin Herbert Shields Madison Beer with Impressive Reflex at Lakers Game
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
Giuffre’s Memoir Alleges Maxwell Claimed Sexual Act with Clooney
House Republicans Move to Strip NYC Mayoral Front-Runner Zohran Mamdani of U.S. Citizenship
Record-High Spoiled Ballots Signal Voter Discontent in Ireland’s 2025 Presidential Election
Philippines’ Taal Volcano Erupts Overnight with 2.4 km Ash Plume
Albania’s Virtual AI 'Minister' Diella Set to 'Birth' Eighty-Three Digital Assistants for MPs
Tesla Unveils Vision for Optimus V3 as ‘Biggest Product of All Time’, Including Surgical Capabilities
Francis Ford Coppola Auctions Luxury Watches After Self-Financed Film Flop
Convicted Sex Offender Mistakenly Freed by UK Prison Service Arrested in London
United States and China Begin Constructive Trade Negotiations Ahead of Trump–Xi Summit
U.S. Treasury Sanctions Colombia’s President Gustavo Petro over Drug-Trafficking Allegations
Miss USA Crowns Nebraska’s Audrey Eckert Amid Leadership Overhaul
‘I Am Not Done’: Kamala Harris Signals Possible 2028 White House Run
NBA Faces Integrity Crisis After Mass Arrests in Gambling Scandal
Swift Heist at the Louvre Sees Eight French Crown Jewels Stolen in Under Seven Minutes
U.S. Halts Trade Talks with Canada After Ontario Ad Using Reagan Voice Triggers Diplomatic Fallout
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
China and Russia Deploy Seductive Espionage Networks to Infiltrate U.S. Tech Sector
Apple’s ‘iPhone Air’ Collapses After One Month — Another Major Misstep for the Tech Giant
Graham Potter Begins New Chapter as Sweden Head Coach on Short-Term Deal
Ecuadorian President Daniel Noboa Alleges Poison Plot via Chocolate and Jam
Lakestar to Halt External Fundraising as Investor in Revolut and Spotify
U.S. Innovation Ranking Under Scrutiny as China Leads Output Outputs but Ranks 10th
Three Men Arrested in London on Suspicion of Spying for Russia
Porsche Reverses EV Strategy as New CEO Bets on Petrol and Hybrids
Singapore’s Prime Minister Warns of ‘Messy’ Transition to Post-American Global Order
Andreessen Horowitz Sets Sights on Ten-Billion-Dollar Fund for Tech Surge
US Administration Under President Donald Trump Reportedly Lifts Ban on Ukraine’s Use of Storm Shadow Missiles Against Russia
‘Frightening’ First Night in Prison for Sarkozy: Inmates Riot and Shout ‘Little Nicolas’
White House Announces No Imminent Summit Between Trump and Putin
US and Qatar Warn EU of Trade and Energy Risks from Tough Climate Regulation
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Nicolas Sarkozy begins five-year prison term at La Santé in Paris
Japan stocks surge to record as Sanae Takaichi becomes Prime Minister
×