Johnson Lost to Lies... Chaos in the UK, Market Reacts Positively

"Partygate" and Other Controversies... Announces Resignation from Conservative Party Leadership
Work Disputes Until New Prime Minister Election... Wallace Defense Minister and Others Mentioned as Successors

Boris Johnson, Prime Minister of the United Kingdom [Photo by AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] British society is inevitably facing turmoil for the time being as UK Prime Minister Boris Johnson abruptly resigned on the 7th (local time) amid the so-called ‘Party Gate’ scandal followed by a controversy over lies. While some uncertainties surrounding British politics have been somewhat resolved, the British pound showed significant fluctuations on the day, but it is expected to face an unstable period until the next prime minister is decided. The UK is burdened with numerous challenges including the Ukraine war, inflation and cost of living crisis, nuclear power construction, and the Northern Ireland issue.

According to the UK Financial Times (FT), the pound, which had been continuously declining due to recent controversies related to Prime Minister Johnson, rebounded on the day. The pound rose about 0.8% against the dollar, recovering to around $1.20 per pound. It also rose to a six-week high against the euro, with the pound-euro exchange rate increasing from 1.16 euros per pound the previous day to around 1.18 euros per pound.

However, on an annual basis this year, the pound has depreciated by 11.5% against the dollar and 10.3% against the euro. This reflects the political and economic turmoil impacting the pound’s value. On the day, the Euro Stoxx 50 index rose 1.95%, and the UK FTSE 100 index increased by 1.14%.

◆How will the UK respond to Ukraine?= Around noon, Johnson appeared in front of the Prime Minister’s Office in London and announced his resignation as Conservative Party leader, stating he would continue to perform prime ministerial duties only until the next prime minister is elected. He announced his resignation exactly three years after taking office in July 2019, and precisely one month after narrowly surviving a cabinet confidence vote on the 7th of last month. The Party Gate scandal, the sexual misconduct case of the Conservative Party Chief Whip he appointed, and the ensuing controversy over lies have all hindered Johnson.

Johnson’s resignation is expected to immediately affect Europe’s response to the Ukraine crisis. Johnson has played a leading role in Europe’s strong stance against Russia, which invaded Ukraine.

On the day, Ukrainian President Volodymyr Zelenskyy, after speaking with Johnson, expressed sadness on his social media and thanked Johnson for his help. US President Joe Biden, in a statement, emphasized that "the UK and the US are closest allies and friends, and the special relationship between the peoples of both countries is strong and enduring," adding that the two countries will continue cooperation on a wide range of issues, including strong support for Ukraine.

Russian President Vladimir Putin, who had been at odds with Johnson, delivered a final blow through a spokesperson, saying, "We hope that someday more professional people who can make decisions through dialogue will come to power in the UK."

◆Who will be the next prime minister?= Attention is focused on Johnson’s successor. Regarding the next prime minister, CNBC reported that the most likely candidates are former Chancellor Rishi Sunak, former Health Secretary Sajid Javid, Defense Secretary Ben Wallace, and Foreign Secretary Liz Truss, while Trade Secretary Penny Mordaunt and former Health Secretary Jeremy Hunt are also possible but less likely candidates.

A rapid survey conducted by polling firm YouGov among 715 Conservative Party members showed Wallace and Mordaunt leading with 13% support each. Former Chancellor Sunak received 10%, and Truss 8%. However, in direct candidate comparisons, Conservative members named Wallace as the most likely candidate, CNBC reported.

Defense Secretary Ben Wallace, former Chancellor Rishi Sunak, Foreign Secretary Liz Truss, Trade Secretary Penny Mordaunt [Image source= Bloomberg]

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The Conservative Party leadership election to choose the next party leader and prime minister is expected to take about one to two months. Since the Conservative Party’s annual conference will be held in Birmingham from October 2 to 5, they plan to elect the next leader before September.

There are also voices calling for Johnson to step down immediately. Kwasi Kwarteng, Secretary of State for Business, Energy and Industrial Strategy, argued that Johnson should resign now and the Conservative Party should elect a new leader as soon as possible.

Conservative MP Simon Hoare said he could not believe Johnson would stay, and another MP insisted that an interim prime minister should be appointed during the recess to handle government affairs. Labour Party leader Keir Starmer also called Johnson’s intention to remain prime minister for a few more months nonsense and demanded his immediate resignation. If Johnson resigns immediately, current Deputy Prime Minister Dominic Raab is likely to serve as interim prime minister.

◆Challenges including inflation and nuclear power= When controversy arose over Johnson maintaining his position until a successor is decided, he said on the day, "I will not implement new policies or pursue major directional changes." He emphasized that major financial decisions would be left to the next prime minister. Accordingly, the UK’s major policy decisions are likely to drift for several months.

The next prime minister will have to take on the poisoned chalice amid the worst situations such as the Ukraine war and inflation. They must also resolve issues related to nuclear power construction and conflicts concerning the European Union (EU) and the Northern Ireland agreement.

Johnson has set a goal to increase the share of nuclear power from the current 18% to over 25% and has promoted new nuclear power plant construction. However, since there has been controversy over new nuclear power construction, nuclear policy may change depending on who becomes the next prime minister.

Among the candidates for the next prime minister, former Chancellor Sunak has opposed additional government spending on new nuclear power plants, saying it is burdensome given the surge in government expenditure after the COVID-19 pandemic, and has called for careful review of energy policy, clashing with Johnson.

This content was produced with the assistance of AI translation services.