UK's Boris Johnson Resigns – Reactions

Amanda Cheesley

8 July 2022

In the aftermath of the news of Prime Minister Boris Johnson's resignation, sterling yesterday rose by 0.5 per cent and the FTSE 100 Index of blue-chips stocks also traded higher. But some commentators see that this effect is likely to be short-lived.

Johnson’s government had been facing controversy for months, first about lockdown parties attended by political leaders and officials in Downing Street and elsewhere during the pandemic, and later about the government's handling of allegations of abusive conduct by Conservative MPs. Johnson, a former newspaper reporter and columnist, was accused of not being honest and open in his statements about such matters to colleagues and the media. As a result, a number of his colleagues, notably finance minister Rishi Sunak and health secretary Sajid Javid, resigned this week. The departure of a finance minister is often the trigger for wider political trouble, as was the case when Sir Geoffrey Howe quit the Margaret Thatcher administration in the late 1980s over the issue of UK membership of the EEC, as the European Union was then called.

Johnson's predicament is at first sight extraordinary, having achieved an 80-seat majority in the December 2019 general election, defeating the Labour Party under its hard-left leader, Jeremy Corbyn, and then unblocking partliamentary obstacles to an exit from the European Union.

In his resignation speech outside Downing Street yesterday, Johnson highlighted, after his resignation, how it was the will of the parliamentary Conservative party that there should be a new leader of the party and therefore a new prime minister. He plans to serve until a new leader is in place; a timetable for the leadership race would be announced next week – a process which could take at least six weeks.

Here are reactions from wealth managers to the news:

: Charles Hepworth, investment director
“The UK’s outgoing Prime Minister Boris Johnson finally conceded his position is untenable, following the highest number of ministerial resignations that the country has ever seen in such short order. Things, as ever with Boris Johnson, are likely to still take a few interesting turns before he exits Number 10.”

“The initial reaction in the pound and the markets was widely euphoric at the prospect of an end to the political chaos that has marked his time in office, but it is unlikely to be sustained – the economic malaise that the UK finds itself in is unlikely to reverse course anytime soon.”

“Boris could stay on as an interim leader until a new one is decided, which would mean a few more months of clinging on to power, albeit effectively neutered. Were that to happen, Labour have already signaled they would push instantly for a vote of no confidence in the Government which, should they win (which is likely), would then drag the Queen in to appoint a Prime Minister. Constitutional crises are not good optics from a market perspective, but it is not surprising that Boris Johnson has crashed out in a ball of flames. UK risk assets look decidedly unattractive until this political circus has packed up and moved on.”

: Ben Laidler, global markets strategist
“Investors have shrugged off the resignation of the British Prime Minister in a snub to its importance to markets. Sterling has strengthened today, the FTSE 100 is up, and the more domestic focused FTSE 250 leads the way.

“Markets may welcome the step toward lesser political uncertainty, with no general election due until January 2025, and potential tax cuts in the meantime to support the weakening economy.”

“It is another reminder that markets are not economies. Despite the UK’s soaring inflation, slumping economic growth, and political uncertainty, the FTSE 100 is the least worst performing major global stock market this year. It is down only 4 per cent versus the 20 per cent falls of the US S&P 500 and Germany’s DAX, benefiting from its mix of cheap commodity and defensive high dividend stocks.”