Published: 25 October 2022
By Suzanne Evans, Director, Political Insight
Penny Mordant dropped out of the Conservative Party leadership race yesterday, leaving only former Chancellor Rishi Sunak in the running, meaning he was automatically appointed as the new leader, and will become Prime Minister today, the third British PM in less than two months. He will also become the first British Asian and non-white PM, and at 42, the youngest in 200 years. In his first short speech as party leader yesterday, at Conservative Party HQ, Sunak warned that the UK faces a “profound economic challenge,” adding that the country needs “stability and unity.” He said he was "humbled and honoured" to be chosen to lead by his party, adding: "It is the greatest privilege of my life, to be able to serve the party I love and give back to the country I owe so much to." Privately, he is said to have ruled out calls for a general election and told his fellow Tory MPs that they must “unite or die”.
Liz Truss will make her farewell speech at 10.15 this morning before travelling to Buckingham Palace for her final audience with King Charles III. Rishi Sunak will then be invited by the King to form a new government, before making his first speech outside No. 10 Downing Street at 11.35am.
The financial markets reacted relatively calmly to the news. The Pound dropped slightly, by 0.1% against the US dollar to $1.1291. The FTSE 100 closed 0.6% up, having fallen back from its lunchtime high, underperforming broader European markets. Ten-year gilt yields fell 28 basis points to 3.78%, hitting their lowest since former Chancellor Kwasi Kwarteng's "mini budget" on 23rd September. BlackRock, the world's largest asset manager, said it had upgraded UK gilts to neutral from underweight, saying "perceptions of fiscal credibility had improved, though not fully." Current Chancellor Jeremy Hunt, who backed Sunak for the leadership and is likely to stay in his post, is scheduled to set out the government's economic plan for taxes and spending on 31st October.
The European Union appears to have welcomed the appointment of Rishi Sunak, according to a Reuters report which cites unnamed EU officials and diplomats as saying they are cautiously optimistic about the prospect of working with him. "The first thing is a profound disbelief and puzzlement about how bad things are going in the UK," one EU official is quoted as saying, adding that Sunak is seen as a more reliable partner than Liz Truss' predecessor Boris Johnson. "He seems to be more sensible than many other types in Britain nowadays. He did warn against Truss' reckless economic policies. EU leaders want a rational counterpart in the EU, the question for us is if we have a reasonable partner there." Meanwhilie, European Council President Charles Michel said on Twitter: "Working together is the only way to face common challenges … and bringing stability is key to overcoming them". His words echoed those of French President Emmanuel Macron, who said last week after Liz Truss resigned that the EU mostly wanted to have a stable and predictable neighbour.
The UK is "doomed" and on a path to being "the sick man of Europe" unless it re-thinks Brexit, former Tory party donor Guy Hands, who runs private equity firm Terra Firma, has told the BBC. The Conservative Party needs to admit it has made "mistakes," he said, while warning that the country faces higher taxes, lower benefits and a possible bailout from the International Monetary Fund. "The reality is when they did Brexit, they had a dream. And the dream was a low-tax, low-benefit economy," he told the Radio 4 Today programme. Outgoing Prime Minister Liz Truss had tried to push through those policies, he said, but it had not worked. "Once you accept that you can't actually do that, then the Brexit that was done is completely hopeless, and will only drive Britain into a disastrous economic state," Hands said. He added that the Conservative Party was, in his view, not fit to run the country. As a businessperson, he tried to be positive about the investment landscape, he said, but that he thought the reality is that the country faces "increasing levels of poverty, and it's poverty which is moving up the economic level", reaching middle income households who will struggle to pay their mortgages. Hands’ warning comes after former governor of the Bank of England Mervyn King said the UK was facing a "more difficult" era of austerity than the one after the 2008 financial crisis in order to stabilise the economy. Lord King said the average person could face "significantly higher taxes" to fund public spending.
Bank of England (BoE) Deputy Governor Dave Ramsden said the central bank was "acutely aware" of the impact that its interest rate increases were having on borrowers, but that the BoE would take the steps needed to get inflation back to target. "I have every confidence that we will take the actions necessary," Ramsden told the Treasury Committee in parliament yesterday. "We are acutely aware of the impact of the actions that we have already taken." He said rates would be "only have to be as high for as long as they have to be high for." Ramsden also said the S&P Global/CIPS flash Composite Purchasing Managers' Index, published earlier yesterday, showing a bigger-than-expected-fall in business activity this month, was "consistent with the economy being in recession."
The S&P Global's flash UK purchasing managers index (PMI) fell to 47.2, down from 49.1 in September. Economists had expected a reading of 48.1. Being below 50, the reading indicates a contraction in business activity. The index showed private sector output fell for the third month in a row as new orders declined at the sharpest pace since January 2021. GDP "looks certain to fall in the fourth quarter after a likely contraction in the third", Chris Williamson, chief business economist at S&P Global, said, attributing the slowdown to a considerable downturn in business and consumer confidence and heightened political and economic uncertainty. "The has caused business activity to fall at a rate not seen since the global financial crisis in 2009 if pandemic lockdown months are excluded,” he said.
The Office for National Statistics has conducted research showing the changes in costs of 30 everyday grocery items over in the last 12 months, and concluded that the lowest-priced items have increased in cost by around 17%. Overall the official measure of inflation for food and drink is running at 15%. Vegetable oil showed the largest percentage increase and average price increase between April 2022 and September 2022, increasing 46% (80p per litre) during the period. Also rising significantly in price were pasta (60%), tea (46%), chips (up 27p to £1.37 for 1.5kg), milk (up 25p to £1.52 for 4 pints) bread (38%) and biscuits (34%). Four items decreased in price: orange juice (down 8%, or 6p per litre) minced beef (down 7%), sugar (down by 0.3%) and rice (down 0.2%).
Half of us plan to spend less on Christmas this year because of the cost of living crisis, market researcher Kantar said yesterday. Kantar said 37% of British consumers are struggling with their financial situation, and 47% are worried about thet cost of Christmas. One in three shoppers expect to spend less, planning to cut gift budgets for close friends and family by over £25 pounds per person. "With the inflationary backdrop, brands will need to ensure their Christmas advertising campaigns strike the appropriate note with the public," Kantar said, noting that only 18% of consumers strongly agree that they are looking forward to festive ads this year.
The Royal Mail is warning people to use any non-barcoded stamps in the next 100 days, as they will cease to be valid for postage on 31st January 2023. The deadline affects "everyday" stamps featuring the late Queen Elizabeth II's profile, but does not apply to themed, commemorative, and Christmas stamps which are non-barcoded, which customers can still use after the cut-off date.
The Royal Mail and The Communication Workers Union (CWU) have agreed to talks through the Advisory, Conciliation and Arbitration Service (Acas) to attempt to resolve their pay dispute which has led to ongoing strike action by workers. The talks are due to start today. Last month, the CWU called for a further 19 days of strike against Royal Mail, potentially spread across October and November, while Royal Mail had said it is losing £1m a day and could have to cut up to 10,000 jobs if planned strikes go ahead.
More rail network strikes are on the cards in the ongoing dispute over pay and job security, the Transport Salaried Staffs' Association (TSSA) said yesterday. The union said its workers in Network Rail and members working for railway companies, will hold strikes for a total of five days in the first week of November. The RMT union has also announced strike action on 3rd and 5th November affecting 14 train operating companies.
A rally in the price of gold has been attributed to the Hindu festival of Diwali, during which time it is traditional to present the precious metal as a gift. The Royal Mint has confirmed it experiences a surge in sales around the festival, with its specially mined 20g, 5g and 1g gold Lakshmi bars proving extremely popular: the festival marks the anniversary of Lakshmi’s incarnation from the depths of a bottomless ocean, Lakshmi being the goddess of prosperity and fortune. Gold has been climbing in price since Friday, picking up from the two-year low of $1,614 (£1,429.08). It is currently selling for $1,649.50 (£1,460.51) per ounce, having fallen slightly since Diwali began yesterday. Diwali ends on Friday.
Twitter founder Jack Dorsey is developing a new social media app, Bluesky Social, which is now accepting users for beta testing. It will launch "soon," he said. The project is said to be a rival to
existing social media platforms such as Facebook (Meta), Instagram and Snapchat. It’s USP? To be free from governmental influence and controlled by users rather than commercialised by a corporation. The app's code will allow user account data to be moved from platform to platform, so a single account will provide access to all users’ favourite social media sites, while assuring them that the owners of those applications would not have control over Bluesky users' data. Dorsey stepped down as CEO of Twitter in May this year, having founded the firm in 2006.
Saudi Arabia is in advanced negotiations to order almost 40 A350 jets from Airbus as part of a broader, multi-billion-dollar drive to launch a new airline and challenge heavyweight carriers in the Gulf, industry sources have told Reuters. There is no guarantee of a deal but if confirmed, the purchase by the sovereign Public Investment Fund (PIF) could be announced as early as this week when Riyadh hosts a major forum, the Future Investment Initiative, the sources said.
Toyota is considering a reboot of its electric-car strategy to better compete in a booming market it has been slow to enter, and has halted some work on existing EV projects, four people with knowledge of the still-developing plans have told Reuters. The proposals under review, if adopted, would amount to a dramatic shift for Toyota and rewrite the $38-billion EV rollout plan the Japanese automaker announced last year to better compete with the likes of Tesla, the news agency says. A working group within Toyota has been charged with outlining plans by early next year for improvements to its existing EV platform or for a new architecture, meanwhile Toyota has suspended work on some of its 30 EV projects announced in December, which include the Toyota Compact Cruiser crossover and the battery-electric Crown models.
Philips' new CEO announced plans on Monday to cut around 4,000 jobs following falling sales and after a massive recall slashed around 70% off the Dutch medical equipment maker's market value in the past year. "We have now had five quarters of declining sales, declining profit, and now... (in the third quarter) we also have become loss-making," CEO Roy Jakobs, just a week into the role, said in a telephone interview. The layoffs will be concentrated in the United States and the Netherlands.
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