After losing two of his most visible ministers and several other high-ranking officials and ministerial aides in the last 24 hours, U.K. Prime Minister Boris Johnson’s leadership is on a knife’s edge.
On Tuesday night, British Finance Minister Rishi Sunak resigned, citing the need for the government to be run “properly, competently, and seriously.” Sajid Javid, who was in charge of the Department of Health, also resigned in protest of Johnson’s leadership, which has been plagued by scandal and controversy in recent months.
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At the same time that a number of senior Tories called for Johnson to resign, David Frost, who had previously served as the government’s negotiator for Brexit, also joined the fray and demanded that the prime minister resigns without further delay.
Even though there have been calls for the prime minister to step down, he is not showing any signs that he is prepared to do so. After the unexpected departures, he reshuffled his ministerial team last night.
Several ministers spoke out in support of Johnson, reasserting their allegiance to him. Top figures staying in the Cabinet include Deputy Prime Minister Dominic Raab, Foreign Secretary Liz Truss, and Home Secretary Priti Patel.
The Likelihood of a Special Election
The likelihood of a snap election in Britain is currently low due to the loyalty of top ministers. Either Johnson would have to resign or face a vote of no confidence if that were to occur. A new challenge would necessitate a rule change to allow another vote within the next 12 months, as he only faced such a vote last month.
Due to the current party rules, Johnson will not be subject to another vote of no confidence until the summer of next year. Allan Monks, an economist, said in a note that was released on Tuesday night that the primary risk right now is either that those rules will be changed to force another vote or that Johnson will be pressured to step down voluntarily.
A new Prime Minister could be in place within the next few months if the Conservatives hold a leadership contest, well before the party’s annual conference in early October.
The Reaction of the Market
As political turmoil in the United Kingdom continued to unfold on Tuesday, the pound hit a new low for the month of March 2020.
#uk sterling heading into uncharted territory as political crisis impacts UK economy with weak £ aggravating inflation. Vicious circle developing… pic.twitter.com/nYkmbRP7po
— Stephen Mitchell 🇬🇧🇺🇦 (@Mitchkew) July 6, 2022
Ben Emons, managing director of Global Macro Strategy at Medley Global Advisors says, “there’s paralysis, and there’s so much uncertainty over how it will exactly play out.”
“The way the markets responded, somewhat negatively as sterling and U.K. gilt yields fell, but then they recovered, and I think that does indicate that as much as there’s uncertainty surrounding the Cabinet and Johnson’s position, it has not fallen apart, he does still have support,” he said.
Sleaze allegations, most recently involving Chris Pincher, the Conservative Party’s deputy chief whip, responsible for maintaining party discipline, have contributed to the current political upheaval in the United Kingdom.
The allegations that Pincher drunkenly groped two men at a private members’ club led to his resignation as a Member of Parliament for the Conservative Party and his suspension from the party last week. It has since come to light that Johnson appointed him to the position despite being aware of the misconduct allegations against him.
Johnson expressed regret for choosing Pincher for the position of deputy chief whip, but the high-profile resignations that followed his announcement proved it was too late.
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