Rishi Sunak is new UK Prime Minister after rivals pull out of race

By

Sandra Halliday

Published
Oct 24, 2022

A select group of voters have chosen the next UK prime minister with Tory MPs backing former Chancellor Rishi Sunak to become not only PM but the first-ever British leader from an Indian background.

His elevation to the top job came after rivals Boris Johnson and Penny Mordaunt pulled out of the race.

So what will it mean for the UK economy? The International markets are likely to feel more confident after the unfunded tax cuts announced by his predecessor Liz Truss spooked those markets and resulted in higher interest rates both for UK government borrowing and for consumers. The value of the pound and British government bond prices rose on news that Sunak had won the contest (although they then eased back).

Retailers are likely to be disappointed though as Sunak was Chancellor when the VAT-free shopping for tourists perk was all-but abolished. And with current Chancellor Jeremy Hunt having reversed Liz Truss’s reversal of this policy, Sunak is likely to be on the same page.

During his campaign to win the Tory leadership in the summer — a contest he lost to Truss — he laid out his policy intentions and that means tax cuts are off the agenda until the economy is on a more sound footing.

While this will crimp the amount consumers have to spend, it’s to be hoped that his policies may have a beneficial impact on inflation, although many inflationary pressures are beyond government control.