So now we know. Liz Truss will be the new UK Prime Minister.
Whilst the leadership election felt like it had been going on forever, in reality it was only on 7th July that Boris Johnson announced he was stepping down as Conservative Party Leader – and thereby as Prime Minister.
Today we have all the speculation and projections confirmed that Liz Truss will be the next leader of the party, officially in post from tomorrow.
At lunchtime today, Sir Graham Brady announced the result of the ballot carried out with Conservative Party members across the UK to choose between Rishi Sunak and Liz Truss as the next leader of the party and thereby as Prime Minister.
Brady announced that there had been an 82.6% turnout in the membership election and the winner, with a majority over Sunak of over 20,000 votes, was Liz Truss who secured 57% of the vote – slightly lower than was expected by many commentators in the run up to today’s announcement.
She has just made a brief speech in London.
The next steps are that she will make the trip to Balmoral tomorrow to officially be appointed as UK Prime Minister in her capacity as Tory party leader.
Thereafter, it’s expected to be a busy week for Truss and her team as they begin the task of attempting to tackle the huge problems facing the UK economy, businesses and citizens alike with what she described in her speech today as “bold plans”. She said she will “deliver, deliver, deliver”.
It remains to see what that will mean in practice and how she will go about achieving it.
Commenting on Liz Truss becoming the new Prime Minister, Dan Boardman-Weston, CEO and Chief Investment Officer at BRI Wealth Management at BRI Wealth Management, said: “After a lengthy summer of debate and disarray, it’s pleasing that we have certainty on who the next Prime Minister will be. The news of a Truss victory comes as little surprise to the markets given that she has been the firm favourite for a number of weeks and the impact on equity, bond and currency markets has been limited today, though sterling and gilts have been very weak over the last month. Truss enters office with an unenviable set of problems that she will have to react to quickly. First and foremost is the energy crisis that will quickly deal a crippling blow to households and businesses as we head into Autumn and Winter. Whilst it’s anticipated that support will be announced for households in the coming days, businesses need clarity on support they may be offered over the coming months. Without support from the government, countless perfectly viable businesses will be destroyed whilst energy prices remain high. There will be no honeymoon period for Truss and her premiership will be made or broken by her action over the next few months. The country needs decisive action and greater certainty. Hopefully, Truss will deliver.”
David Zahn, Head of European Fixed Income at Franklin Templeton, comments on the market reaction to the UK’s new Prime Minister, Liz Truss:
“The financial market will focus closely on Liz Truss’s new policies at a time when debt to GDP ratio is at 100% and financial flexibility is limited.
“The gilt market will probably see higher yields as investors wait for clarity from more detailed policies over the coming months. Investors will wait for her new policies and cabinet appointments and will penalize increased deficit spending without a plan of how to bring the UK government financial house in order when the demands on the government are very substantial.
“Liz Truss won 57% of the vote so will need to mend fences to bring the party back together. Her inbox is probably the fullest and with the most acute problems of any prime minister in recent history.
“Truss must deal with a cost of living crisis, an energy sector crisis, supporting the Ukrainian war, a slowing economy heading into recession and an overall need to support businesses and individuals.”
Commenting on Liz Truss being announced as Prime Minister, Frédérique Carrier, Head of Investment Strategy at RBC Wealth Management, said: “PM Truss will likely be less keen to balance the country’s books than former Chancellor Sunak would have been, and interest rates are likely to increase further during her premiership.
“PM Truss seems less fiscally conservative than former chancellor Sunak. She now seems to be in favour of supporting the economy other than through tax cuts. This ultimately means higher borrowing, and in turn it means the Bank of England could be forced to increase rates further than otherwise would have been the case.
“For now, we expect the Bank of England to deliver two 50bps rate hikes at its meetings on September 15th and November 3rd as economic data has not deteriorated sufficiently yet to prevent it from being hawkish.
“We still expect the UK economy to weaken materially going forward, but we don’t expect the labour market to weaken enough to prompt a return to a slower pace of tightening in November. A larger 75bps rise is possible at the November meeting but will likely depend on whether inflation surprises on the upside and the fiscal plans of the new UK government.
“PM Truss is less likely to repair the trading relationship between the UK and the EU than PM Sunak might have been. She broke off talks with the EU regarding the Northern Ireland protocol earlier this year, preferring to take unilateral action. Such a hard stance on this issue could ultimately lead to a trade war with a region which remains the UK’s main export market. This would be problematic given the already weaker UK economy.”
Lewis Shaw, of Shaw Financial Services comments: “With Liz Truss now officially crowned as the new PM, we need radical and swift action on the cost of living crisis, immediately capping prices for both consumers and businesses, whatever the cost. Secondly, we need policies to get the supply of goods up to meet the demand to bring inflation under control. If that means a new settlement with the EU about trade barriers, then so be it. Finally, we need massive investment in the NHS because, without further funding, the NHS will collapse this winter under the strain and backlog brought on by COVID.”
Philip Dragoumis, Thera Wealth Management, is looking for some strong pledges from Truss as he comments: “It will be impossible for Truss to keep all her commitments to cut taxes while at the same time announcing a government package at least as big as (if not bigger) than the one announced by Keir Starmer to help people deal with the rise in energy costs. The UK government bond market has recently been very concerned that Truss’s government will be fiscally irresponsible and blow a hole in the public finances. The ten year government borrowing costs have soared to almost 3% from 1.6% in July. We need some immediate clarity on the support package but also a clear pledge that finances will not be derailed, otherwise borrowing costs will spiral out of control.”
Alec Collie, Head of Medical at Wesleyan Group, the specialist financial services mutual for doctors, said: “Liz Truss faces an NHS that is grappling with severe workload and workforce challenges. She’s said that slashing backlogs will be one of her top priorities, and all eyes will be on what concrete steps she now takes to deliver real change.
“One rumoured action she has on her ‘to-do’ list is to fix the pension tax rules that we know are stopping doctors from taking on extra work, and even forcing some to leave the NHS altogether. Changes to the lifetime allowance have been mentioned, but addressing issues arising from the annual allowance will be essential too.
“This is particularly important now. Because of inflation, many more clinicians could now receive an annual allowance tax charge for last year’s pension growth – something many may simply not have realised. More could receive one for this year too if, as expected, inflation continues its dizzying climb.
“We simply can’t afford to lose any more skilled, dedicated professionals from our hospitals and GP surgeries. Anything that penalising them for continuing to go above and beyond for their patients is simply unacceptable.”
Samuel Mather-Holgate, an IFA at Mather & Murray said: “Truss has got a huge to-do list. She will want to get over to Ukraine and show her support there as well as making calls to Biden and the EU as the Northern Ireland Protocol will probably dominate her tenure. However, the cost of energy will be her number one priority. It will be interesting to see who Truss surrounds herself with in cabinet.”