Kwasi Kwarteng has stepped down from his role as chancellor after less than six weeks in the role.
In a letter to Liz Truss, Kwarteng said: "You have asked me to stand aside as your Chancellor. I have accepted."
Jeremy Hunt has been appointed as Kwarteng's replacement, becoming the fourth chancellor this year.
The decision comes after widespread criticism of the measures announced in his ‘mini-budget’ last month, which included the removal of the 45% higher rate tax for high-income earners, later reversed after the decision caused volatility in financial markets.
After an unprecedented repricing in UK assets following the mini-budget, the Bank announced a temporary intervention on Wednesday 28th September to "restore orderly market conditions", which included the purchase of long-dated UK government bonds.
The removal of Kwarteng makes him the UK's second-shortest serving chancellor, following Iain Macleod who died just 30 days into his role in 1970.
Susannah Streeter senior investment and markets analyst at Hargreaves Lansdown, commented: "Amid the wait for the wheels to screech on another u-turn, the door to no. 11 Downing Street is already groaning on its hinges, with Kwasi Kwarteng exiting the Treasury.
"The finger of government blame was pointing straight at the Chancellor as soon as he was ordered to dash back to from the US a day early, going straight from arrivals to a humiliating departure. His promise of a medium-term fiscal plan to be delivered on Halloween did not provide enough reassurance that the government was in control of economic policy and investors showed signs of taking fright again.
"But Liz Truss is still facing a rocky horror show of her own making, given that the UK is still hurtling back into a 1970s time warp. Even if this embarrassing reshuffle is accompanied with a fresh reversal of policy, as far as the credibility of the government is concerned, significant damage has been done. There will be a long way to go and significant bridge building ahead before the UK risk premium disappears.
"The cost of government borrowing fell further earlier, with gilt yields dropping as speculation swirled that there would be a change at the Treasury, an indication that investors in the UK might welcome this change to the front seat line up. But since his departure was made clear, 10-year gilt yields have edged up slightly and the pound fell below $1.12, with no fresh euphoria in sight as markets digest another bout of political upheaval.
"For now the Prime Minister has won breathing space, but the financial markets are highly sensitive and anything less than a co-operative approach with the Bank of England, the Office of Budget Responsibility and international institutions could cause fresh instability."
