In fact, it’s the third equity fundraising after Stroll’s original rescue of Aston Martin in early 2020. For a business that supposedly had a clear financial road ahead in February, this is a major event. Now comes the main event, flagged at the same time: a full-octane rights issue to raise £576m, or more than the car company’s entire stock market value. In July, Saudi Arabia’s Public Investment Fund was recruited as major investor, pouring £78m into the tank. The messaging, to put it mildly, has moved on. Let me be crystal clear, black and white: we do not need money,” said Lawrence Stroll, executive chair of Aston Martin, as recently as February. Aston Martin’s profit days are still long way off Markets tend not to tolerate ambiguity for long. Was the second half of that statement an attempt to calm nerves, or does it indicate a new approach? Clarity is essential – and quickly. In his warmup routine in the FT on Monday, Kwasi Kwarteng, the likely next chancellor, said Truss’s administration was “fully committed” to independence, but added that “coordination across monetary policy and fiscal policy is important”.
For the past 25 years, the UK’s credibility in financial markets has been closely bound to the notion that the Bank is beyond political meddling. They haven’t been heard from any other incoming PM since independence was granted in 1997. The campaigning hints and nudges that Threadneedle Street’s mandate could be reviewed must sound alarming from abroad. But the plan is more likely to be received with an open mind if investors also know that the Bank of England will continue to be the guardian of monetary policy. The great hope of the Truss camp, it seems, is that markets will smile benignly and embrace a vision that imagines a bigger deficit being part of a step towards a permanently higher growth trajectory for the UK economy. Looser fiscal policy is not the orthodox prescription to those problems. Today’s pressing problems are a widening current account deficit, the highest inflation in the G10 group of rich nations, and a large chunk of national debt payments tied to interest rates. Both ambitions might be considered virtuous goals, but the accompanying promise of unfunded tax cuts is what worries markets.
On that score, Deutsche Bank’s currency analysts were merely stating the obvious in a note on Monday when they greeted the new prime minister by saying the risk of a balance of payments crisis in the UK “should not be underestimated” and that “policy announcements over the next few weeks will be key in determining the risk of extreme macro outcomes”.Ī remarkable feature of the overlong leadership campaign is that the sketch of “ Trussonomics” has barely graduated from soundbites about a “pro-growth” mindset and “supply-side reforms”.
The second task, though, is almost as important: avoid scaring the financial markets. L iz Truss’ first task is obvious: announce a plan on energy prices to get the country through the winter.
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