Sunak as PM? Is it the buy sterling moment, and the beginning of something better?

Today we likely get a new PM. The opportunity for Rishi Sunak is challenging, but he may get markets on side and start the recovery process for the deeply dysfunctional and divided Conservative Party. He probably still loses by 2024 – but political stability may be back on the agenda.

Blain’s Morning Porridge Oct 24th 2022 –  Sunak as PM? Is it the buy sterling moment, and the beginning of something better?

“This is not the time for Cakeism…”

This Morning: Today we likely get a new PM. The opportunity for Rishi Sunak is challenging, but he may get markets on side and start the recovery process for the deeply dysfunctional and divided Conservative Party. He probably still loses by 2024 – but political stability may be back on the agenda.

Rishi Sunak at the Helm of the UK from 2 pm this afternoon looks nailed on! Am I excited… go figure.

Time to buy the UK? Well… the jury is still out on the immediate future, but the picture could certainly improve. If the markets buy stability and strength on Sunak’s elevation – and UK assets rally – that’s a great start to his regime. It gives him real opportunities to address the Tories’ fractured political machine. Time for political catharsis.

The market prospects stemming from greater stability and political credibility are finely balanced by how Sunak addresses the mountain of crises overhanging the nation, which remain… awesomely problematic. It won’t help if he’s sniped and undermined by a resentful right-wing of the party.

The Porridge is not about political opinions, but what the market thinks.

For the UK to become investible after the chaos of the last 5 months, the market wants to see clear signs of political competence being restored. Global investors and traders have already factored in a Labour Landslide by 2024 – and the Tories would do well to get over that. The only issue of debate appears to be the scale of the Tory wipe-out. How much can Sunak mitigate it?

The political cycle is five-years between elections, but with limited time before the next one, Sunak should probably play a longer-game: addressing the internal division and mixed messaging now, and working on the basis the scale of that Tory defeat can be lessened – not avoided.

And.. there is always hope! Any Tory leader knows never to discount the skill of the Labour Party to snatch defeat from the Jaws of Victory! If the opportunity arises, Sunak needs to be in control to exploit it. Labour’s 30-point lead in the poles will diminish if Sunak demonstrates both competency and a degree of ruthlessness making his party electable.

The first thing for Sunak to figure out: what should the Conservative Party be?

Under the flair and showmanship of Boris (and lest-we-forget, the absolute madness and un-electability of Jeremy Corbyn’s Labour), the Tories were able to span and own the political spectrum from right to soft-left, decisively holding the key centre-ground of UK politics – highlighted by winning the red-wall seats previously held by Labour.

It’s clearly in Sunak and the Parties’ interest they continue to contest and hold that centre ground. To do so, means focusing entirely on votes not ideological beliefs, and pruning some dead wood.

  • The failure of Trussonomics was its nakedly brutal and unfair economic ideology – favouring of Growth, Growth, Growth by apparently giving all the money to the rich, while dishing our Austerity to the poor. Lop it off.
  • The great success of the Right within the Tories has been to establish their economic orthodoxy around the Holy Church of Brexit at all costs. That hasn’t brought any of the benefits it promised. Brexit is done… but to increase growth Sunak and conservative Conservatives know it’s time to stop the rot, cauterise the disease and move into a new more positive relationship with Europe. Brexit got done, now we have to figure the consequences, and move on from the discredited state-religion of the Tory Party. Lop off the ERG – they are irrelevant.

Sunak has a once-in-a-century opportunity to set in motion moves towards an exciting new Conservative Party to contest the next election but one in 2029. The road to recovery starts with a single step – and in the case of the broken and divided Tories, it needs to be a brutal one to shake out the baggage and discord on the party fringes.

If Sunak wants to convince the market of long-term stability, then it’s time for a healthy purge of the internal dissent, the factions, and to cauterise the cancer of Brexit at the party’s core. I am sure he will have little list, a little list, of those who will never, ever be missed from UK politics again.. (Apologies to G&S.)

What should Sunak’s immediate approach be? Does he try to stretch out his deeply divided House of Commons majority by pandering to the pundits calling for unity, giving sustenance to underlying irreconcilable divisions at the heart of the party – in short continuing to pretend the right-wing ERG are one-nation Tories? Or does he let them make their own decision to go?

The ERG are over-represented in Parliament, having won their seats and patronage under the Tory flag. Long term the electorate remain centrist, they want growth and prosperity. The right wing’s Brexit Fervour is single-issue politics that’s dominated the party too long. Shunt the focus and it dies – the Tory right will wither, becoming as politically irrelevant as Nigel Farage.

Sunak’s first choice is the composition of his cabinet. This will be a key sign for markets – does he try and herd the cats of his fractured party by unifying the un-unifiable? Will his new Cabinet comprise constructive talents and destructive fundamentalists?

Certainly, the current Cabinet needs a complete rebuild to impress the markets. It’s stuffed with Truss’s second rate yes-men and women who traded supported her ideology for patronage. She was forced to pander to the Tory Right. Sack them all.

The key signal to watch out for, is how Sunak creates a new Cabinet of all the talents. It will need Right Wingers, like the impressive Kemi Badenoch. He may decide the key is to stop the ERG voting down the government too early.

Talent is one thing. Impressing the City and markets is another. Jeremy Hunt played a key role bringing a touch of stability to the mad, bad, last seven days of Truss, but he’s not Chancellor material. Put him in another senior role. Bring some stability, certainty, and a more predictable path to electoral change.

And finally.. what should Sunak do about Boris.

Nothing. Absolutely Nothing. No contact. Let him freeze.

We may never know the truth of Boris Johnson’s “statesman-like” (barf!) decision to spare the Nation another spell of his chaotic brand of slapstick government, but I am reliably conformed the number of Tory MPs willing to join his electoral suicide pact was considerably short of the triple digits he claimed. I am so unsurprised I won’t even shout “Liar, liar pants on fire” at him.

It was fascinating to watch the lesser pondlife of Westminster publicly associate themselves with him. The only meaningful star to defend him was the previously well-regarded defence secretary Ben Wallace. The funniest was the leading opportunist, Nadhim Zahawi, announcing Boris 2.0 moments before Johnson pulled out!

There are times when all we wish for is a good old Byzantine Coup – take the losers, tied them up in a bag (without cats, as that would be cruel to felines), and chuck ‘em all in the Thames… (I guess that is where the word Sack comes from…)

The thing that measures all political lives is just how badly they end in failure. I’ve been around a while, but I can’t recall more than a handful of politicians in my lifetime who have left with honour.

Gordon Brown wandered off into the sunset, having inherited the stalled “things-can-only-get-better” Blair party, disliked by over half the population, beaten foursquare at a general election – yet he came back to save the union with a superb rallying of Scottish No to independence vote. John Major – seriously can you think of him without the vision of Eggwina? – was another essentially politician who wandered off after a lost-election, but has never had a shot at redemption. As for the rest… all diminished by their time in office.

Among my mates we reckon the best politicians are the ones we lost – who doesn’t watch Michael Portillo on his train programmes wishing he’d been PM, or Ed Balls, who may be a sh*t dancer, but is a likeable fellow.  If only… if only…

Out of time, back to the day job, and poised on the buy sterling button..

Bill Blain

Strategist – Shard Capital


  1. Bill,

    You seem to have followed the anti-Brexit wave of people who claim that the UK’s performance compared with the EU has been poor since Brexit. I have often been tempted to quote some of the figures from the Briefings for Britain newsletter which tend to suggest quite the opposite but have tended instead to hold my council.

    I suggest you listen to the first at least one third of the attached interview given by Ashok Mody who I am sure you will agree is an eminent economist. He quotes IMF figures which suggest that, although we are still behind, Britain’s GDP per person has actually increased when compared with Germany since 2015. He also suggests that compared with the UK, the Euro area will have severe difficulty in coping with the increase in fuel costs this winter.

    • Aside from the fact that there are lies, damn lies and statistics, a brief look at World Bank data for GDP per capita (in USD) suggests the following:

      Country 2015 2021
      Germany 41,103 50,801
      UK 45,404 47,334

      But why would we worry about actual numbers?

  2. I signed up for your silver service because I respect your insight into macro markets and their convulsions
    Whilst politics plays a part in global oversight I am frustrated by your occasional political outbursts in particular your adoption on mainstream thinking that Brexit was all about economics and should therefore be judged solely on that basis
    Wrong for many of us it was about regaining the right to make and unmake our own laws and the supremacy of our elected government, for all its failings , over the unelected commissioners and lawmakers of the EU
    Such things don’t come with a tangible price tag and are thus hard to quantify but that doesn’t make them any the less valuable

    • Austen
      Thanks for signing up.

      Let me try to reply without offending you.

      The Morning Porridge is about Economics and Markets. It is not about nationalism, flag waving, diplomacy or even politics. It references politics, because political mistakes move markets and change economic outcomes.

      You like my comments on markets, but not when I comment about the market and economics implications of Brexit?

      Any UK citizen has the right to believe what they wish about Brexit. I also voted for Brexit, but on the basis I believed it would spawn growth opportunities, be a growth multiplier, and provide considerable economic benefit. In all these respects it has failed – not because of the remoaners, but largely because of squandered political opportunities.

      I will continue to comment on the growth implications of the Brexit failure.

      I also respect your right to regard Brexit as a truimph of National Sovereignty – but that’s not what the porridge is about.

      Please repect mine to regard it as a matter of economics and growth.

      Sovereinty matters but is a very grand, honourable, yet nebulous concept compared to the penury economic mistakes are foisting upon us.

  3. Brexit has been good for UK v Brexit has been bad. Foolish comments because Brexit, was an event, for sure but it is also a journey, and that is just starting. Wait 10 years and then look at the figures.
    Since ‘Brexit’ we’ve had incompetence in power, someone who didn’t want to do the hard yards, either to prepare for Brexit, or following. I hope Sunak finds a cabinet heavyweight to look at and take advantage of the opportunities.

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