LONDON, Oct 21 — Liz Truss will resign as British prime minister, brought down just six weeks into the job by an economic programme that roiled financial markets, pushed up living costs for voters and enraged much of her own party.
Following are latest events, comments and context:
Politics
Boris Johnson and former finance minister Rishi Sunak lead the potential contenders to replace Truss, with candidates canvassing support to become Conservative Party leader in a fast-tracked contest.
A leadership election will be completed within the next week to replace Truss, the shortest serving prime minister in British history. The first results in the contest will be announced at 1700 GMT on Monday.
French President Emmanuel Macron and Irish Prime Minister Micheal Martin voiced hope yesterday that the next British leader would bring stability to the country after Truss resigned.
The United States and Britain are enduring allies and their strong bond will last, US President Joe Biden said yesterday after Truss announced her resignation.
Residents in a traditional Conservative Party-voting area of Britain hailed Truss’ resignation, with one saying the state of the country was “an absolute disgrace” following her six weeks in office.
Daniel Pryor, who lobbies for governments to shrink the state and cut taxes, feels Truss’s brief, disastrous spell as prime minister has killed off his dream of a low-tax, deregulated British economy for at least a generation.
Economy
British shoppers reined in their spending in September while public borrowing grew by more than expected, underscoring the challenge facing new finance minister Jeremy Hunt and whoever succeeds Truss as prime minister.
Hunt reiterated on Friday that the government will do “whatever is necessary” to drive down debt in the medium term.
“To stabilise markets, I’ve been clear that protecting our public finances means difficult decisions lie ahead,” Hunt said.
Confidence among British consumers remained close to the lowest level on record with households facing double-digit inflation, rising interest rates and political chaos.
Markets
Sterling fell today, weighed by the economic and political uncertainty. Analysts reckon that markets will need some time to thoroughly shake off the political risk premium built over recent weeks.
The UK’s main equity indexes also dropped, as the poor retail sales figures and a jump in bond yields added to the weak sentiment following the tumultuous week in politics.
What’s behind the crisis?
Britain’s financial market were plunged into turmoil on September 23 after then-new finance minister Kwasi Kwarteng announced billions of pounds of unfunded tax cuts.
The Bank of England was forced into emergency bond-buying to stem a sharp sell-off in Britain’s £2.1 trillion (RM10.9 trillion) government bond market that threatened to wreak havoc in the pension industry and increase recession risks.
Kwarteng’s replacement Jeremy Hunt on Monday scrapped “nearly all” of the economic plan and scaled back Truss’s vast energy support scheme, announced in September, in a historic U-turn to try restore investor confidence.
The BoE interventions have highlighted a growing segment of Britain’s pensions sector — liability-driven investment. — Reuters
