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Rishi Sunak will face tough economic tests right away.


Lower interest rates will be a consolation for Mr. Sunak. For one, the lower rate will decrease the amount the Treasury would need to set aside for interest payments, which could reduce Cut spending and raise taxes. But there are other reminders of the economic difficulties Britain faces.

On Monday, a gauge of economic activity in the UK fell, as the services sector posted its worst monthly decline since January 2021, according to the Purchasing Managers’ Index that measures business trends. economic. The index of services and manufacturing activity fell to 47.2 points. A reading below 50 means a contraction in activity.

Chris Williamson, economist at S&P Global Market Intelligence, said data showing the pace of the economic slowdown is gathering momentum.

And on Friday, credit rating agency Moody’s changed its stance on the UK from stable, while reaffirming the country’s current Aa3 investment rating. Lower credit ratings tend to lead to higher government borrowing costs.

Moody’s said the outlook has changed to negative because of “increasing uncertainty in policymaking amid weaker growth prospects and high inflation.” There is also a risk that increased borrowing will challenge the UK’s ability to pay its debt, particularly if there is a “persistent weakening of policy credibility”.

This is just the latest on a laundry list of government economic concerns. These include helping low-income households combat rising costs of living, encouraging investment to improve weak productivity growth, smoothing Britain’s trade relationship with the European Union. and develop the labor market to ensure businesses can find people with the right skills.

“We need a clear long-term vision of how the new prime minister will respond to the challenges ahead,” Shevaun Haviland, director general of the British Chamber of Commerce, said in a statement. , Director General of the British Chamber of Commerce, said. and the communities that rely on them to thrive. “

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