Business hails Sunak election as new PM

Businesses across the UK breathed a collective sigh of relief on Monday as Rishi Sunak was elected unopposed as the nation's third prime minister in as many months.

Rishi Sunak

By HM Treasury - Flickr: The former Chancellor and now Prime Minister, Rishi Sunak, records a public information film, OGL 3,

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There had been fears that, were Mr Sunak to be opposed by either former PM Boris Johnson or Penny Mordaunt, there would be more days of uncertainty on domestic and global markets while a national election of Conservative Party members was held.
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'Need a plan businesses can believe in'

In the end, Mr Sunak, who lost the previous leadership election to Liz Truss last month, won the backing of more than 200 Tory MPs, while both of his would-be opponents withdrew when they failed to get the backing of 100 MPs, the threshold necessary to spark a contest.Business leaders like the fact that Mr Sunak - at 42, the youngest prime minister in modern history - has a fiscally restrained approach and is expected to effectively tackle the financial turmoil created by the controversial 'mini-budget' introduced, and then mostly scrapped because of its unfunded tax cuts, when Ms Truss was in Downing Street. Shevaun Haviland, director-general of the British Chambers of Commerce (BCC), said the recent political and economic uncertainty had been "hugely damaging to British business confidence" and must now come to an end.“The new prime minister must be a steady hand on the tiller to see the economy through the challenging conditions ahead," she said. “This means setting out fully costed plans to deal with the big issues facing businesses: soaring energy bills, labour shortages, spiralling inflation, and climbing interest rates. “We cannot afford to see any more flip-flopping on policies - the UK’s businesses need a sustainable, long-term economic plan they can believe in."

UK open for business

Ms Haviland said the BCC was writing to Mr Sunak to set out the action needed to tackle the main challenges facing business. "It is vital we see progress made in these areas to keep doors open and promote investment."Tony Danker, director-general of the Confederation of British Industry (CBI), congratulated Mr Sunak and praised his approach when he was Mr Johnson's chancellor."He has a track record of seeing the economy through difficult times and is now coming in at a time of great uncertainty with tough choices ahead," said Mr Danker.“The new prime minister can lose no time in easing the impact of market turmoil on households and firms, and helping to restore fiscal credibility.“A fiscal plan for the medium-term (due to be unveiled next week) that is both credible and a platform to generate economic growth, will be central to achieving that.”

A £34bn fiscal hole still to fill

Ruth Gregory, senior UK economist at Capital Economics, said that Chancellor of the Exchequer Jeremy Hunt - who has only been in post little more than a week and whom Mr Sunak is expected to retain in the job - will still need to set out a new set of fiscal rules and achievable policies to fill the hole in the public finances."In a note published last week, we estimated that even after Chancellor Jeremy Hunt wiped from history most of Truss’s tax policies, a fiscal hole of around £34 billion remained," she said."Overall, the news that Rishi Sunak will be the next PM means that the big downside risks to the economy posed by a prolonged period of political instability and a significant fiscal tightening, have receded. But with a fiscal tightening still on its way, the risk is that the recession will ultimately be deeper or longer than we currently expect."

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