How British finance sees Truss’s resignation
Although Truss's resignation was expected, it will still have an impact on the UK's financial situation – it will take a little longer for rates to drop. The analysis by Richard Flax, Chief Investment Officer Moneyfarm
After just over a month in office, Liz Truss resigned as Prime Minister, ousted by conservative MPs. A new Premier is expected to take office within a week. Unsurprisingly, the Labor opposition is calling for immediate general elections, arguing that the Conservatives no longer have the mandate to lead the country. But the Tories did not become one of the most fearsome election-winning machines in Western politics by exploiting their opposition role. They will go to great lengths to find someone reasonably credible to occupy 10 Downing Street and rebuild, as effectively as possible, their shattered credibility.
Two years is a long time in politics. They may not be enough to allow the Conservatives to win the next elections, but a temporary solution could prevent the electoral "bloodbath" for which the party seems destined. However, it is unclear whether two years would be enough for the UK to shake off the distrust of the financial markets.
Keeping the same Prime Minister for more than three months should be a good start, but it's only a small step in the right direction. What the UK needs is stability and solid ideas.
Although the resignation was expected, it will still have an impact on the country's financial situation. We think it will take a little longer for rates in the UK to go down and this will prove painful for those who need to access mortgages or are faced with rising rates.
The return of austerity promoted by Jeremy Hunt could prove to be a difficult purpose to maintain in the current economic and social environment and it is reasonable to imagine that it will end up being less decisive than promised.
Again, reforms will have to take a back seat to politics and there are enough open questions for uncertainty to continue to affect London's financial market volatility.
This adds to the many issues that are affecting the market. That said, opportunities can also be found in volatile markets. UK assets look relatively cheap compared to other geographies and could present an opportunity in the coming months.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/dimissioni-truss-impatto-finanze-regno-unito/ on Sun, 23 Oct 2022 05:53:27 +0000.