Former Chancellor Rishi Sunak, who warned that Liz Truss’ economic plans for Britain were a “fairy tale,” won the contest to succeed her as prime minister on Monday, taking over the world’s sixth-biggest economy at a time of deep financial and political turbulence.
Mr. Sunak will formally enter Downing Street after his only remaining rival for the job, former defense minister Penny Mordaunt, said on Twitter she would drop out of the contest. “Rishi has my full support,” she wrote. Mr. Sunak’s rise to the top job in Britain marks a historic moment. The grandson of Indian immigrants to Britain, the 42-year-old will be the U.K.’s first person of color and the first Hindu to lead the country.
But his success will be determined by how well he manages the growing challenges to Britain’s economy as high inflation and a looming recession create a sense of growing despair.
The former hedge-fund manager arrives with a mandate to bring calm to the ruling Conservative Party following a period of unparalleled chaos that will see the country run by three prime ministers in seven weeks—a first for the U.K. On Sunday night, his main rival for the job, the colorful but controversial former leader Boris Johnson, pulled out of the leadership race, citing the fact that he couldn’t unite the party.
Mr. Sunak takes over from Ms. Truss, who became the shortest-serving prime minister in British history after her flagship economic program to stimulate the economy with tax cuts during rising inflation was rejected by investors, causing the pound to sink to a record low and the Bank of England to intervene in bond markets to stabilize the price of U.K. government debt.
On Monday, financial markets reacted positively to Mr. Sunak’s victory. Yields on government debt fell as investors bet that Mr. Sunak, an experienced treasury official, will oversee cuts to public spending to shore up the nation’s finances.
The decision caps Mr. Sunak’s second attempt to secure his place as prime minister in months. He campaigned over the summer to become British leader but lost to Ms. Truss.
During the campaign, Mr. Sunak criticized Ms. Truss’s plan to borrow funds to immediately cut taxes. He said Britain’s high inflation, which is currently at 10.1%, needed to be tackled first before any taxes were cut.