After a turbulent premiership that lasted just 44 days, Liz Truss abruptly resigned from her post on Thursday, plunging Britain deeper into turmoil and leaving its economy barrelling toward a potential recession.
Rishi Sunak and Penny Mordaunt are now seen as the front-runners to replace her, and there is also a possibility that Boris Johnson will seek to return to office. It’s unclear if anyone can pull Britain’s battered economy back from the brink.
Markets were shaky even before Truss took power, largely thanks to high inflation and an energy crisis that has roiled Europe and is hitting Britain particularly hard.
“The fundamental problem that the UK economy has is that the price of energy has gone up by a lot,” said Dan Davies, a managing director at Frontline Analysts.
“That’s the fundamental problem; everything else in the economy is just basically how we’re going to spread that problem around.”
As Russia squeezed Europe’s natural gas supply over the war in Ukraine, British households have faced skyrocketing energy bills and double-digit inflation.
With winter looming, the country’s electricity operator has also warned of three-hour blackouts in the worst-case scenario that supplies are exhausted.
Now, the question is how Truss’s successor will attempt to wrangle surging prices and stave off recession—or if that’s even possible. “I don’t see any miracle,” Davies said. “I don’t see anyone coming up with a solution that’s just going to turn things around and make everyone think, ‘Oh why didn’t we do that instead?’”
Truss responded to the country’s economic crisis by unveiling a contentious economic agenda that Davies characterised as “intrinsically quite dumb and politically really dumb.” Her plan called for unfunded tax cuts that would have required significant government borrowing in an already uncertain period.
That unnerved markets and sent the value of the pound collapsing to a record low, forcing the Bank of England to launch an emergency intervention; it also drew public condemnation from the International Monetary Fund.
Facing mounting criticism and political pressure, she ultimately reversed some of her plans and then fired her first chancellor of the Exchequer, Kwasi Kwarteng, replacing him with Jeremy Hunt last week. Hunt quickly moved to overhaul her entire economic agenda, dealing yet another humiliating blow to the embattled politician.
The Conservatives are now racing to name a new prime minister; they are expected to confirm a new leader by October 28.