Sunak vs. Truss, who would investors prefer?
Whoever wins the race to be the UK’s next PM has a major job on their hands. The worst cost of living crisis for a generation, a looming recession, global warming…. Today, we’ll assess who we think investors might prefer. After that, we’ll delve into the top fundamental events to watch out for this week. Let’s do this!
What does Liz stand for?
Truss’ plan to revive the UK economy rests in a single policy, a whopping £30 billion of tax cuts, which she’s pledged to introduce from day one of her premiership.
Specifically, the National Insurance increase introduced in April would be scrapped, she’d overhaul business rates, and end the planned rise in Corporation Tax due next year.
The plan is to give people a little more in their pockets and encourage spending, driving employment and the cycle of prosperity. Essentially, she plans to delay Britain’s COVID hangover.
She’s also promising to get rid of all of that pesky “Brexit red tape” as soon as next year.
What about Rishi?
Sunak is all about tackling inflation, labelling Truss’ tax cuts as “immoral”.
Instead, he’s committed to cut the basic rate of Income Tax from 20% to 16% by the end of the next parliament. He also wants to stick with plans to increase Corporation Tax in 2023 and keep National Insurance at its current level.
That Corporation Tax bit is important. Current plans will see small businesses with profits below £50,000 continuing to pay 19% in tax with businesses earning more paying more (like income tax). A new full rate of 25 per cent will start being paid on profits above £250,000. He’s also promised to extend the current 50 per cent reduction to business rates.
So, who’s best for biz?
It totally depends on your perspective, of course! Many analysts have said that Truss would be better for small to medium sized businesses, and Sunak better for startups.
Both plans are radically different and cannot both be right, but a recent YouGov poll has suggested that Sunak is leading on economic policy. While some analysts have suggested that Truss’ tax cuts will cost the economy £80bn, as opposed to the £30bn she has quoted.
Liz’s stance on European “red tape” could also bite hard. The UK cannot afford to make any more enemies right now. Further destabilisation of the relationship with Europe would be ill advised and could hurt the very small to medium sized businesses she claims to support.
Whatever happens on the 5th of September, it’s going to be a bumpy ride for GBP pairs, the FTSE 100 and the UK economy at large. Investors beware!
Over to you!
If it was up to you (and perhaps it is!) who would you vote for? Who has it right? Let us know by tweeting us at @_Contentworks.
Top trading events this week
It’s going to be a pretty quiet week, but here are the hottest events for your trading calendar.
Monday
No major events are planned.
Tuesday
● GBP — S&P Global/CIPS Manufacturing PMI Flash (AUG)
Wednesday
● USD — Durable Goods Orders MoM (JUL)
Thursday
● EUR — Germany GDP Growth Rate YoY Final (Q2)
● USD — GDP Growth Rate QoQ 2nd Est (Q2)
Friday
● USD — Core PCE Price Index YoY (JUL); PCE Price Index YoY (JUL); Michigan Consumer Sentiment Final (AUG)
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The Contentworks team
