Rishi Sunak is set to take office as Britain’s first prime minister of Asian heritage. He faces a complex cocktail of challenges, including the UK facing a crisis of economic credibility, energy inflation and war in Ukraine. Mint explains the issues facing Britain’s new prime minister.
How did Sunak get the top job?
After prime minister Liz Truss released a disastrous mini-budget that tanked the markets, it became clear that her days were numbered. She announced her resignation after just 45 days in office. In order to contest for the leadership, candidates had to win the support of at least 100 MPs. Sunak was quick off the mark, despite a late challenge by former Prime Minister Boris Johnson, who quit the race despite claiming the support of around 100 MPs. The only other contender, Penny Mordaunt, dropped out at the last minute, leaving the former finance minister as the only one in the field.
What are Sunak’s challenges?
Britain is staring down a crippling economic crisis. The country has struggled with low productivity and wage growth since the 2008 global financial crisis. These longer-term economic problems have been worsened by inflation. The demand boom after the reopening of economies after covid-19 and the energy crisis caused by the war in Ukraine have fuelled inflation. The country has also committed billions to defence spending because of the security threat from Russia. Balancing spending commitments with a need for sound economic management will be the defining challenge of Sunak’s premiership.
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What are Sunak’s strengths and weaknesses?
He has a reputation for strong economic management. As finance minister during the covid-19 crises, Sunak spearheaded the British government’s economic crisis response, including measures to help small businesses. However, his key weaknesses will be political. He is distrusted by Boris loyalists who see him as responsible for bringing down Johnson’s government.
What can the global economy expect?
The markets welcomed Sunak’s election. Stock markets and the pound recovered some ground as news of his elevation to 10 Downing Street filtered through. Sunak will face the monumental task of forging new trade relationships for Britain in the aftermath of Brexit. The country faces a series of negotiations with the EU over the future of their economic relationship. As the West’s third largest economy, the UK’s economic success is crucial to the developed world’s economic prospects in a bear market.
What will it mean for India?
The potential return of a stable government is welcome news. Both countries were slated to conclude a free trade agreement, which was initially scheduled to be signed by Diwali. This was derailed by anti-immigration comments made by Truss’ home secretary Suella Braverman, who has since resigned. With Sunak at the helm, India will hope for a measure of political stability, leading in turn to progress on the free trade agreement. His larger position on immigrants will be key to the success of any free trade deals.
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