Sunak Needs to Reaffirm UK as Reputable Tier-1 Economy

Rishi Sunak is the UK’s next Prime Minister after winning the Conservative Party leadership race. But just how significant a job does he have in store? 

Dan Ashmore, Financial Analyst at Invezz, has commented:

“Rishi Sunak has been confirmed as the UK’s next Prime Minister, following the disastrous 44-day reign of Liz Truss.

While new Chancellor Jeremy Hunt had already confirmed Truss’ infamous mini-budget has been walked back in nearly every regard, Sunak nonetheless has a huge job on his hands to restore faith in the UK economy – and the pound sterling – after Truss’ mini-budget calamity.

The biggest hit to the UK over the last month has been the startling dent to credibility. Investors have already been fleeing the pound en masse since the start of the year – it is down 17% against the dollar – and Sunak will need to reaffirm the UK as a reputable, tier-1 economy, as opposed to the u-turning, indecisive and poorly-planned regime it has looked like over the past month, which scared investors so much.

Confidence in the pound must return, especially ahead of a winter where the National Grid has already warned of power cuts on cold evenings due to the energy crisis – remember, the UK is reliant on energy imports and hence a struggling pound is a problem. 

Elsewhere, eyes will also be glued to interest rates, as the inflation situation continues to lag behind a lot of Europe. Should Sunak’s policies be on the softer side, the BoE may be forced to hike interest rates further, which will suck liquidity out of the economy and be a troubling sign for investors.

With reports of house prices already wobbling, jumps in mortgage payments as a result of higher rates will also have an effect on house prices.

All in all, Sunak has an immensely difficult job on his hands, as the UK heads into winter in a far more precarious state economically than at any point since the Great Financial Crash in 2008.”

For some further insight from Dan into the current British economy please click here.