UK economic chaos, pound plunge hits business

Like many small businesses in Britain, fish and chip shop owner Harry Niazi hoped for government help to keep his London restaurant going in the face of rocketing energy bills and soaring inflation.

But an economic plan announced last week by Prime Minister Liz Truss' new government brought no relief — far from it.

For Niazi and millions across the United Kingdom, things went from bad to worse after the promise of huge unfunded tax cuts sparked turmoil in financial markets and sent the British pound tumbling to a record low against the U.S. dollar this week.

The pound's slide hits many businesses hard because imported materials and commodities like natural gas that are priced in dollars will be more expensive.

Businesses may be forced to pass the costs on to consumers, which would further push up inflation — already close to a 40-year high at 9.9%.

That would be yet another squeeze on people whose household energy bills are going up Saturday even though Truss' plan capped a more devastating 80% rise as natural gas prices soar.

"I'm terrified of putting my prices up. We have a good volume of customers coming in. we don't want to lose them, but every day something goes up in price. I don't know how we're going to cope," Niazi said from his south London shop, Olley's Fish Experience.

"Everything's based on the dollar — diesel for the vessels to catch the fish, trucks to deliver our products. It has a big impact," he added.

The haddock, cod and other white fish he imports are also priced in dollars, and that cost had already gone up hugely since July, when Britain's government imposed a 35% tariff on Russian seafood imports as part of sanctions over the war in Ukraine.

"It's really affected the fish and chip industry," said Andrew Crook, president of National Federation of Fish Friers.

"Then on top of that, the low pound is going to drive the price even further because fish is brought in dollars. So we're going to face more increases."

In London's famous Oxford Street shopping district, some local residents expressed anger and concern towards the government's handling of the cost-of-living crisis.

"I think the government don't care about working people in this country. I think they don't care about what's happening with people's energy. I don't think they care about the people who did not elect them in the first place. None of us elected them. I think they were chosen by a very small minority of people, some of whom don't even live in this country. And they have destroyed what little hope we had of coming out of the COVID crisis. And I'm absolutely furious," said Jacqueline Saphra, 62 year-old resident of London.

The mood of uncertainty has heightened since the government unveiled a plan to cut 45 billion pounds ($48 billion) in taxes while giving no details on spending reductions, meaning they will rely on borrowing to fund public spending.

Officials also want to spend billions more to subsidize steeply climbing energy bills for homes and businesses.

The plans were met with widespread concern from economists and investors about ballooning government debt, and the International Monetary Fund warned that the moves could worsen inflation and the cost-of-living crisis.

"It's backfired both politically in the opinion polls, but also in the markets because the government is seen as not having any credibility in the long term path for the public finances," said economist Julian Jessop, who has in the past advised Truss on economic policy.