Liz Truss warned of mass bankruptcies if firms left in limbo over energy bills

Liz Truss is facing a political and economic baptism of fire this week with warnings of mass bankruptcies across the economy – even as the new prime minister prepares to lead the nation in a minute’s silence on Sunday night to honour the Queen’s legacy.

Before the Queen’s funeral at Westminster Abbey on Monday and her burial at St George’s Chapel in Windsor Castle, Truss will appear on the steps of No 10 on Sunday night at 8pm as part of a final national “moment of reflection” on the monarch’s life and legacy.

Downing Street is hoping that people will take part in their homes and on their doorsteps across the UK. Sailors, soldiers and air crews from the armed forces stationed overseas will also pause, including on ships and in bases, in what government officials believe could become a global event.

But with the period of national mourning ending after the funeral, when Truss will fly to New York to attend the UN general assembly, and with MPs returning to Westminster on Wednesday or Thursday, the transition back to normal politics will be sudden and potentially bruising for a prime minister who had only been in office for two days before the Queen’s death.

On Saturday night, leading UK business organisations were renewing pressure on ministers for “absolute clarity” on what help government would offer them with their energy bills and warning of dire consequences if they continued to be left in limbo over the level of support in the medium term.

The new business secretary, Jacob Rees-Mogg, will make an announcement on support for business on Wednesday to be followed by a mini-budget by the new chancellor, Kwasi Kwarteng, on Friday.

The director general of the British Chambers of Commerce, Shevaun Haviland, said Truss’s previous announcement that businesses would benefit from a cap on bills similar to that for domestic users, for six months – made hours before news of the Queen’s death was made public 10 days ago – had been very welcome.

But she insisted that more detail was now urgently needed if many companies were not to scale back operations and some even close because of an inability to plan ahead.

“This cap will be a good thing for business,” Haviland said. “But we now need to know two things: first, what is the size of this? Then very quickly we are going to have to get into what is going to happen after six months.”

She said many businesses had seen their energy costs rocket by 300% or more compared with last year, adding to a list of problems that was causing many to question their futures.

“I have had several businesses say to me this is worse than Covid. Rising raw materials, soaring costs including labour, inflation at 10% and now energy prices. They do not know where to turn. In May, 23% of our businesses said they would have to scale down production or cease trading. It will have gone up significantly since then. The government has got to get on with it.”

Emma McClarkin, chief executive of the British Beer & Pub Association, said: “Pubs and brewers will not be able to wait days, let alone months, to get clarity on their energy bills. Businesses are making decisions now as to whether they will be able to make it through the winter. It is no exaggeration to say that the impact of this energy crisis could be worse than the pandemic in terms of permanent closures.

“We urgently need complete clarity from the Government on whether this cap will help pubs and brewers out of a crisis that has been building for months. We’re urging the chancellor to seriously consider what immediate reassurance he can give for the thousands of business owners who are currently in despair.”

Kwarteng is expected on Friday to unveil a huge package that includes details of the energy price cap and £30bn in tax cuts – including reversing April’s rise in national insurance – as promised during the Tory leadership election.

Tory MPs are already concerned that Friday’s event, which is also expected to include the axing of a cap on bankers’ bonuses, will provide an “open goal for Labour” in Truss’s first weeks as prime minister.

Keir Starmer’s party is determined to highlight the contrast between what it will portray as Tory tax cuts for the rich and its policy of paying for a freeze in the energy price cap for those most in need by taxing the excess profits of energy companies. The £13bn-a-year reduction in national insurance also assists richer households more than poorer families.

Economists say a key challenge for Truss will be to prevent the international money markets from losing confidence as Britain’s embattled economy enters its worst period since the 1970s, when oil-price shocks forced the Treasury into the arms of the International Monetary Fund.

With inflation hitting heights not seen for 30 years and the pound sinking to a 37-year low, there is the possibility that a gamble on tax cuts and deregulation of the City will spook markets and leave the Treasury struggling to cope with a wave of business closures and millions of households in fuel poverty.

Forecasts for the economy now show it will contract in the second half of this year and all of next year, though the extent of the downturn is unclear after the injection of £150bn into the economy via the government’s new £2,500 energy price cap

The gloomy outlook is not expected to deter the Bank of England from increasing its base interest rate from 1.75% this week.

Meanwhile mourners will be advised today not to set off to join the queue for the lying in state as it approaches full capacity. Tens of thousands of people have filed past the Queen’s coffin in Westminster Hall since Wednesday evening, with the lying in state set to end at 6.30am on Monday ahead of the funeral.

Entry to the queue will need to be closed hours in advance so as many people as possible who are already in the queue will be able to pay their respects.