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Mohamed A. El-Erian

Truss Faces Four Hurdles to Spur Growth in UK

The new prime minister needs to navigate a few risks to ease living costs and expand the economy.

The prime minister has her hands full.

The prime minister has her hands full.

Photographer: Eamonn M. McCormack/Getty Images

After the mourning period and state funeral for Queen Elizabeth II, the attention of the new Liz Truss government in the UK returns to how best to moderate cost-of-living pressures while seeking growth. The success of this approach, details of which will be made available in the next few days, is not assured. Much will depend on four economic and financial risks to a new government that wishes to be seen hurrying to address multiple crises.

With the UK confronting a worsening cost-of-living crisis, the new prime minister moved quickly two weeks ago to announce that she will shield households from what would have been additional sharp increases in their energy bills. The coming price increase for the typical British household will be limited to 25% over the next two years, instead of a possible nearly threefold increase, using a cost stabilization mechanism that provides, to quote Truss, “a new energy price guarantee that will give people certainty on energy bills.” Businesses will receive support for six months, though the exact form has not been announced.