New government must restore credibility and build more resilient economy

Ziwen Bu, Assistant Professor in Finance at Birmingham Business School, examines the economic challenge facing Rishi Sunak.

Macro shot of a rolled up five pound note, focusing on the note's denomination

Now that Rishi Sunak has become the UK’s latest Prime Minister, replacing Liz Truss and becoming the third person to lead the country in seven weeks, we anticipate even more turnover at the top of government with Sunak expected to appoint his own team this week. The UK political chaos significantly increases economic policy uncertainty. An increase in economic uncertainty is an unfavourable shift in the investment opportunity set, leading investors to reduce their consumption and investment demand so that they save more to hedge against new unpredictability. Given all the economic, political, and fiscal challenges we have, investors are awaiting a credible plan for the future as soon as possible. The challenge for the new government is not only to restore credibility for the short term but also to build a more resilient economy for the long term.

Notes for editors

Dr. Bu is available for media interviews relating to the UK Government’s economic policy.

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