"With the third Prime Minister in just a year expected to be announced by the end of the month, the UK will still be viewed in financial markets as politically unstable."
This afternoon, Liz Truss announced her resignation after just 44 days as prime minister.
A new leadership contest will take place over the next week to decide who will become the third Prime Minister of 2022.
Experts from the finance, mortgage and pensions industries have reacted to the news:
Giles Coghlan, chief market analyst at HYCM: “After just 44 days in office, it appears that the markets and a party in open revolt have sealed Liz Truss’s fate. Although Truss was brought into usher in an era of growth and ‘trickle-down economics’, her strong pro-growth policy was poorly timed, sending the UK bond markets into a sharp sell off as her policies fanned the flames of surging inflaton. To fend off instability, the Bank of England has even intervened in gilt markets, and it remains to be seen whether the central bank will now hike interest rates more quickly.
“With all that in mind, Truss’s departure is likely to be mildly GBP positive, depending on her successor for the premiership. Already, the UK gilt market was supported as rumours of the prime minister’s resignation came to light this morning, which is a good sign for the pound’s stability.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown: "First her policies went up in flames, then her brief career as Prime Minister. The great political gamble of Liz Truss has spectacularly backfired but not before wreaking significant damage to the UK economy. It will take considerable time before the risk premium attached to UK assets fades away, following the financial nervous breakdown which followed the mini-budget.
"With a political implosion seemingly imminent, and expectations rising that Liz Truss’ minutes in power were numbered, the pound crept up in value, heading back towards $1.13. As she gave her resignation statement, it largely held onto gains. Sterling is highly sensitive to economic policy uncertainty and even though the ship Britannia will still be left largely rudderless, with a successor still to be chosen, as far as investors are concerned, the future is marginally brighter without her in charge. Ten-year gilt yields eased further today, as speculation soared about her resignation, a sign of tacit approval from the bond vigilantes who punished the UK by deserting its government’s debt as worries raced up about fiscal responsibility. However, on the equity markets, news of Truss quitting was met with another bout of nervousness, as political uncertainty conspired with worries about the impact of recession.
"With the third Prime Minister in just a year expected to be announced by the end of the month, the UK will still be viewed in financial markets as politically unstable. What investors crave is more steadiness and reliability but until they know who will take charge and lead an economic recovery, that stability still remains highly elusive which means that neither sterling nor stocks are likely to make any big strides of progress."
Andrew Megson, CEO of My Pension Expert: “Truss’ reign as Prime Minister has caused a tremendous amount of damage in a short space of time. Her vision was for the UK to punch its way out of trouble, going all-in on growth and productivity to fend off the cost-of-living crisis and impending recession. Unfortunately, she has merely piled more financial worries onto households across the country.
“Financial markets have been put in a spin by wayward economic policy. Inflation is back above 10% and likely to rise further when the now only six-month price cap ends in Spring 2023. And the Bank of England has said that interest rates will rise faster than expected as it seeks a degree of stability.
“Financial planning has been made very challenging. Take the multiple U-turns over the triple-lock pension – will the Government commit to it or not? How can people map out their financial futures with such inconsistency?
“We can only hope that Truss’ replacement can quickly bring about calmness, clarity, and certainty, allowing people to effectively plan for the future. In the meantime, it is important that those worried about their finances, whether that is unmanageable debt, the performance of investments or their retirement strategies, seek out advice and support.”
Simon Webb, managing director finance and capital markets at LiveMore Capital: “The resignation of Liz Truss throws the country into further turmoil just as the markets were starting to settle down. The term “we need a grown up in charge” has been somewhat over-used in the past couple of days, but the sentiment is true if what it means is that we need competence and stability. At least the Conservative party has pledged to elect the new leader within the week so the period of uncertainty will be limited. What we need then are sensible, sound fiscal policies that run through to the next general election, to reassure the markets and give the country and the rest of the world the confidence that the UK is still a sound place to invest and do business. Of utmost urgency for every mortgage holder is the need to see interest rates and the cost of living stabilise so that they can budget for their futures.”
Stuart Clark, portfolio manager at Quilter Investors: “While Liz Truss’ resignation can draw a line under the unsettling policies, U-turns and shambolic operation of the latest government, there will, rightly so, be calls for a fresh election in order to validate the future direction of U.K. government policy.
“A rushed process to elect a new leader and proceed with the Autumn statement will not allay concerns and anything short of a fresh mandate is unlikely to assuage international concerns about the stability of the U.K. government. This unfortunately will continue to act as a further headwind to unleashing the opportunities that exist within the economy and stock market. The UK equity market has been beaten up and could be considered attractive for investors at current valuations. However, with political risk becoming further embedded into the system, investors are going to have to wait before it becomes viable once again.
“One silver lining we are seeing is the gilt market and sterling reacting positively to Truss’ departure. This, coupled with the Deputy Governor of the Bank of England’s comment that the bank may not raise rates as high as the market expected, does provide a steadying feeling following the volatility of the last few weeks. However, fiscal policy is still very much up in the air, and with inflation continuing to ravage consumers’ incomes, the economic picture still looks challenging and will for some time, regardless of who sits in No.10.”
Riz Malik, director of R3 Mortgages: "The country fought back and won. I cannot express how happy I am. The markets should react positively, which may influence the MPC for their next base rate decision. Halloween will be the next key date, especially if the next PM is installed by then. I am not expecting to see lenders start cutting their rates until sanity has been restored in Westminster."
Mike Staton, director of Staton Mortgages: "It's hard to imagine it but it's pretty safe to say Liz Truss is leaving the country in a worse position than she found it. If ever there was going to be a definition of the grass isn't always greener, Liz Truss has owned it. Liz Truss has made one correct decision in her role of Prime Minister, and she made that today by handing in her resignation. However, the fine print needs needs to be checked so that there is no possibility that she can perform another U-turn on this decision. How she ever got voted in shows how much of a farce the current system is. Under no circumstances should another Prime Minister be allowed to have this sort of power without being voted in by the public. Ladies and Gentleman, Liz Truss has left the building, and Thank God."
