There are still far more questions than answers about exactly what Liz Truss is planning to do to help households and businesses weather the current energy crisis, but we do know that whatever is announced tomorrow won’t be paid for using further windfall taxes.
Power generators enjoyed an immediate surge with share prices of British Gas owner Centrica, SSE and Drax all up as investors were finally able to put to bed lingering concerns that the government might seek to offset the cost of its support package by taxing recent bumper profits.
The prime minister is adamant that the best course of action for the future health and wealth of the country is to keep the private sector on board her growth juggernaut by persuading them to invest the extra cash flooding into their coffers to prevent a repeat of the current crisis in years to come.
Danni Hewson, AJ Bell financial analyst, said: “For the public, the question of who pays will pale into insignificance in the short term provided the support is enough to bring them back from the precipice. There will be some for whom the measures don’t go far enough, but for this winter at least most people will now be faced with easier choices.
“But the devil will be in those pesky details and though a price freeze is expected to pour some water over sizzling inflation, there remain questions about how growth can be delivered with the country trudging wearily towards recession. And the retail renaissance seen earlier in the week seems to have been short-lived. Stocks like Next, JD Sports and Primark owner Associated British Foods have given back some if not all of their previous gains.
“Though the roster of ceremony and circumstance will inevitably keep UK investors firmly focussed on domestic matters, it’s been impossible to ignore the latest economic data from China. The slowdown in both exports and imports demonstrates the fragility of the global economy and the scale of the shock that covid has precipitated. Whilst China’s manufacturers have suffered under zero covid policies, heat waves and supply snarl-ups, the US has powered up. Its trade deficit is narrowing and exports in July hit a record high. This shift bodes well for the economy and is expected to have a significant impact on America’s economic engine.
“But another fall in oil prices demonstrates exactly how concerned markets are about the future of global demand. Inflation seems to be easing, but the volatility of the last two years has taught us not to accept anything as a fait accompli until it’s written in the history books.”