Following one of the most chaotic moments in British political history, Rishi Sunak will become the country’s next prime minister after his competitors withdrew from the contest.
In less than two months, Rishi Sunak, a 42-year-old former finance minister, will take over as prime minister of Britain.
- Liz Truss, his predecessor, was ousted from office after just six weeks due to her economic policies, which shook financial markets, increased consumer prices, and infuriated a large portion of her own party.
- Prior to withdrawing from the contest, Boris Johnson, who was forced out of office as prime minister by his parliamentarians in July, was planning to mount an astonishing political return.
- Penny Mordaunt, a former defense minister, entered the race to become the nation’s sixth prime minister in six years.
When King Charles extends an invitation to Mr. Sunak, one of the richest lawmakers in Westminster, to form a government, he will take office as prime minister.
- Rishi Sunak, a former Goldman Sachs analyst, will be the country’s first prime minister of Indian descent.
- He is in charge of guiding the nation through an economic crisis and rising voter resentment.
- Although a general election won’t need to be held for another two years, opposition parties argued that it should be held right away.
- In some surveys, the opposition Labour Party leads the ruling Conservative Party by more than 30 points.
- The announcement that Rishi Sunak was the only candidate left caused a brief increase in the pound, but it soon fell back to its previous levels.
The 10-year British government bond yield is currently 3.83%, down 22 basis points from the previous day.
- The pound’s medium-term prognosis, though, appears problematic.
With Boris Johnson out of the race, there may be a little less confusion, but Rishi Sunak doesn’t exactly have a strong platform outlining brighter futures for the UK economy when the background is still the background, according to John Hardy, head of FX strategy at Saxo Bank.
- In September, British consumers made significant expenditure cuts, while state borrowing increased more than anticipated, highlighting the problem confronting finance minister Jeremy Hunt.
- On Friday, Jeremy Hunt reaffirmed that the government would take “whatever steps are necessary” to reduce debt in the medium term.
- Senior UK economist Ruth Gregory of Capital Economics in London said: “The likelihood of a large budgetary consolidation has decreased as a result of today’s revelation that Rishi Sunak would succeed David Cameron as Prime Minister of the United Kingdom. The incoming PM would nonetheless need to put in a lot of effort to win back the confidence of the financial markets.”
Why is there a crisis?
- On September 23, after then-new Finance Minister Kwasi Kwarteng revealed billions of pounds in unfunded tax cuts, Britain’s financial markets were rocked.
- The Bank of England was compelled to engage in emergency asset purchases to halt a severe sell-off in the $2.3 trillion market for British government bonds that threatened to devastate the pension sector and raise the likelihood of a recession.
- Replacing Mr. Kwarteng To try to regain investor confidence, Jeremy Hunt made an unprecedented U-turn on Monday and canceled “almost all” of the economic strategy and reduced back Truss’s large energy support program, which had been launched in September.
- The BoE actions have drawn attention to a developing area of liability-driven investing in the British pensions system.