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UK's Liz Truss Resigns Amid Conservative Turmoil – Reactions

Tom Burroughes

21 October 2022

Liz Truss, elected as leader of the ruling UK Conservative Party, and appointed Prime Minister 44 days ago, resigned yesterday. Having sacked her Chancellor of the Exchequer, Kwasi Kwarteng, after a controversial mini-budget that had reversed earlier planned tax hikes, and then forced to accept a U-turn on policy with most of Kwarteng’s tax changes reversed, Truss later suffered the humiliation of the resignation of her Home Secretary, Suella Braveman. In that case, it emerged the women had had a row over immigration policy.

The Conservative Party, tracing its origins back more than two hundred years, has been the most successful political force in the history of parliamentary systems, famous for producing statesmen and women with the calibre of Robert Peel, Benjamin Disraeli, Lord Salisbury, Stanley Baldwin, Winston Churchill, Harold Macmillan and Margaret Thatcher. As they all knew, power is perilous. Peel famously split the party over the great issue of the Corn Laws in 1846 (an issue that hit the party in much the same way as the European Union did more than a century later). Margaret Thatcher was ousted due to a mix of factors, including her growing scepticism over the EU. (But both Peel and Thatcher were transformational figures.) And now Truss, a Remainer who wanted to make Brexit work, and who made economic growth her policy goal, has gone.

Sterling went up slightly yesterday against the dollar when news filtered out that Truss had resigned. It is unclear exactly when a new Tory leader will emerge – the process is expected to be far faster than the election of Truss in September.

The broader context is that politicians worldwide are coping with rising energy prices, the legacy of a decade of quantitative easing, challenges of ageing populations, Russia’s invasion of Ukraine, and the aftermath of a global pandemic. Truss sought to tackle issues such as low growth, poor productivity and the calcifying effect of very low interest rates. Other countries are in the same position, to varying degrees. The Conservatives’ agonies are unlikely to be the only examples of such problems.

Here are some comments from wealth managers and other financial professionals.

William Marsters, senior UK sales trader at Saxo
"The pound has spiked following the Prime Minister's resignation speech as the market can take some temporary confidence that there will be no more outlandish Truss-like economic policies. Liz Truss stepping down signals an end of a catastrophic few weeks with the economy being beaten down by the now former PM's “growth plan.”

Though many will be glad to see the back of Trussonomics, the announcement of a Tory leadership contest next week leads to more uncertainty on who could be next in No.10.

Sterling's game of snakes and ladders is far from over, yet it's unlikely GBP will show many signs of long-term recovery. The economy is likely to continue to suffer at the hands of rising inflation, which has led to crippling everyday costs affecting households and businesses up and down the UK, reiterated by yesterday’s stubbornly high CPI announcement."

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 to validate the future direction of UK 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 UK 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."

Robert Alster, chief investment officer at Close Brothers Asset Management
"The impact on markets of Liz Truss’ resignation over the short term will all depend on the fiscal stance of her successor, who they appoint as chancellor, and how both these events play out in the mini budget at the end of the month. Markets are looking for a more balanced budget and more political stability for the UK, and sterling is rising in the hope that the new prime minister will provide both."

Dan Boardman-Weston, CEO and chief investment officer at BRI Wealth Management
“The resignation of Liz Truss marks the end of a shambolic period of government. The country and markets need certainty, stability, and confidence during these highly uncertain times. Hopefully the Conservative Party can coalesce around a unifying candidate and government can get back to focussing on how to navigate the country through these turbulent times. Sterling, gilts and equity markets have all fallen following the announcement whilst it remains unclear who will be the next prime minister. Hopefully, once the runners and riders are known, markets will react more favourably, and we can move into a period of greater political and economic stability."

Amit Patel, Trinity Finance
"Finally Liz Truss has made the correct decision to resign as PM. We need a general election now, for the sake of the economy. The longer this merry-go-round of prime ministerial mediocrity continues, the greater the damage to our country that will be done."

Lewis Shaw, Shaw Financial Services
"We need a general election. We cannot have more of this circus. Everyone I talk to agrees: let's have an election get it over and done with once and for all, and inject some democracy back into the UK. The game is up for the Tories now; if they can make it as painless a transition as possible because that's the only honourable thing they can do now, I'm sure we'd all be grateful."

Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial
"Truss has done the right thing, considering she had no authority left whatsoever. Notwithstanding that, this is a total embarrassment for the Tories. They now go into a leadership election that only MPs have a say on. 

The new PM will have no legitimacy at all. I fully expect that they will call a general election for the early spring and use the next six months to stabilise the economy and do a PR campaign on the electorate to salvage some seats for next term."

Kieran Boyle, managing director at CKB Recruitment Ltd
"Well what a fabulous 44 days that was Liz. Thanks for tanking the markets and screwing over borrowers. This is what happens when a Liberal flips to the Tory party and then tries to be a Liberal. I hope the door doesn't hit you on the way out. Now SMEs will be asked to bail out the country, whilst the large corporates continue to dodge their taxes."