Liz Truss becomes new UK prime minister. What are the challenges in store for her?

The United Kingdom Foreign Secretary Liz Truss defeated rival Rishi Sunak to be named the new British prime minister on Monday (September 5). She succeedsBoris Johnson who was forced out following a string of controversies.

After the result was announced, Truss said, "We need to show that we will deliver over the next two years. I will deliver a bold plan to cut taxes and grow our economy."

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"I will deliver on the energy crisis, dealing with people's energy bills, but also dealing with the long-term issues we have on energy supply," she added.

Truss is Britain's third female prime minister afterMargaret Thatcher (Conservative, 1979-90) andTheresa May (Conservative, 2016-19).But the road ahead is not going to be easy as she has a mammoth task to address multiple crises that the nation is facing on different fronts.

Surging energy prices

At the moment, the UK is facing multiple crises. The economy is forecast to go into a long recession later this year with inflation at a 40-year high.

The new PM will have to tackle the energy crisis and a productivity crisis as both have affected people's living standards.

Britain's energy regulator announced that the power bills will jump 80 per cent to an average of 3,549 pounds ($4,188) a year from October. This will send millions of households into fuel poverty. Businesses are also at risk unless the government intervene and comes up with a solution.

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Amid the Russia-Ukraine war, supplies are down nearly 50 per centthis year. There are chances that Moscow will cut off all gas supplies this winter. Just like Germany, France and Spain, the UK also needs an urgent crisis plan.

In a research note, Goldman economists said, "In a scenario where gas prices remain elevated at current levels, we would expect the price cap to increase by over 80 per cent in January (vs 19 per cent assumed in our baseline). (This) would imply headline inflation peaking at 22.4 per cent, well above our baseline forecast of 14.8 per cent."

Inflation

The Bank of England has anticipated that as the energy crisis intensifies, inflation will jump to 13 per cent. According to Citigroup, the nation could peak at 18 per centin early 2023. Meanwhile, Goldman Sachs warned that it could reach 22 per centif the natural gas prices "remain elevated at current levels".

At 10.1 per centin July, Britain had the highest rate of annual inflation among Group of Seven advanced economies. High dependency on imported gas and a fast-weakening currency are some of the reasons for British inflation.

In the last three months alone, the pound fell to almost 8 per centagainst the dollar. This performance is worse than the euro or even the Japanese yen. If this scenario continues to worsen, it will make the imports of energy priced in dollars even more expensive.

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Brexit

The new UK PM backed remaining in the European Union before the 2016 referendum on membership of the bloc, but she had switched sides after the public voted to leave.

Now, she has spearheaded proposed legislation to override parts of the Northern Ireland Protocol the UK signed with the EU governing current trade in the province.

She has promised to take all EU laws off the UK statute book to help "turbocharge" growth. Truss has made no proposals to address chronic post-Brexit labour shortages in the UK, particularly of seasonal workers.

Defence

Truss plans todesignate China as a threat to national security, but looking at other issues, this shouldn't be the priority for the UK right now.

While campaigning, she had said that as PM, she would increase defence spending to 3 per centof GDP by 2030 from 2.3 per centof GDP projected this year.

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