LONDON: British Prime Minister Liz Truss said on Thursday she was resigning as prime minister, brought down by her economic programme that sent shockwaves through the markets and divided her Conservative Party just six weeks after she was appointed.
Truss was fighting to remain in power after the collapse of her economic programme shattered her authority just over six weeks into the job.
Here’s a timeline of the events that led to her resignation.
Latest events, comments and context:
- Truss said the Conservative party she heads would hold a leadership election to be completed within a week.
- Truss’s resignation came after she lost her interior minister, Suella Braverman, less than a week after she fired her finance minister. Braverman cited “serious concerns” about the government.
- Sterling pared gains after Truss resigned. Britain’s midcaps jumped as much as 1%.
- Investors reined in bets of a full percentage-point interest rate increase by the Bank of England next month after a top official said it remained to be seen whether rates rise as sharply as the market has been expecting.
- The pound fell to a one-week low vs the euro and GBP/USD traded above 1.1200 with 1.1192-1.1240 in the Asian session range. 1.1186 was Wednesday’s three-day low.
- Worries over a deepening political crisis in the UK and rising interest rates globally kept London’s main stock indexes under pressure, with shares of homebuilders edging toward a multi-year low hit recently.
- The biggest jump in food prices since 1980 pushed British inflation to 10.1% last month, matching a 40-year high hit in July in a new blow for households grappling with a cost-of-living crisis.
- British banks are bracing for a potential tax hit after a source said finance minister Jeremy Hunt was reviewing the current surcharge on bank profits.
What is behind the crisis?
- The Bank of England was forced into emergency bond-buying to stem a sharp sell-off in Britain’s 2.1 trillion pounds ($2.3 trillion) government bond market that threatened to wreak havoc in the pension industry and increase recession risks.
- The sell-off began after then-new finance minister Kwasi Kwarteng’s tax-cut announcement on Sept. 23.
- After firing Kwarteng, a close friend and ally, on Friday, Truss announced that corporation tax would rise to 25% as intended by her predecessor Boris Johnson, reversing her earlier plan to freeze it at 19%. Kwarteng’s cut to the highest rate of income tax had already been reversed.
- His replacement Hunt on Monday then scrapped “nearly all” of Truss and Kwarteng’s economic plan and scaled back her vast energy support scheme, announced in September, in a historic U-turn to try restore investor confidence.
- The BoE interventions have highlighted a growing segment of Britain’s pensions sector – liability-driven investment.
- LDI helps pension funds use derivatives to “match” assets and liabilities to avert risks of shortfalls in payouts, but the soaring interest rates have triggered emergency collateral calls for those funds to cover the derivatives.