What do investors want most? Dull, boring and predicable investment narratives and the removal of doubt. I fear the UK has broken all these rules through the removal of Sajid Javid, and the swift appointment of Rishi Sunak. I’m concerned Sunak carries too much “baggage” to carry the role of UK Chancellor effectively.
resignation dismissal of Sajid Javid as Chancellor is a worrying development in ongoing UK political uncertainty. He was seen as a pragmatic practical balance to Boris. He was well liked among senior City leaders and opinion-formers – considered to be a City insider. His binning by the Boris/Cummings Axis is destabilising and could damage the Boris Bounce expectations for the UK economy. The Morning of the Long Knives was supposed to reset government into a “strong and stable” phase.
Instead it has highlighted the Boris Govt is neither, and is not yet grounded.
Javid was told he had no choice but to accept Cummings’ team and ditch his own advisors. Cummings wants complete control of No 11 – he doesn’t want an independent-minded chancellor holding up his spending and fiscal plans. Although Javid wasn’t a great presenter or debater, he had the ability to deal with the fiscal challenges of Brexit and government spending. Retaining credibility is critical for any sovereign issuer, and Javid was seen as safe-hands. But, he was never going to accept being CHINO – Chancellor in Name Only.
It will raise further questions about how Cummings intends to re-order UK leadership and the Civil Service. It also will cause concern about Boris’ loyalty – Javid was quick to confirm his support for Boris in the leadership contest, but his reward was to be thrown under the proverbial No 37 Bus. Who’s next?
However, in terms of where the UK goes next, the swift anointment of Rishi Sunak as new Chancellor needs in-depth consideration. He was clearly waiting in the wings for the job to tumble into his lap.
I am wondering what the real deal is? While Javid was of Pakistani origin, Sunak, Priti Patel and others elevated to senior Government positions share Indian heritage.
After Sunak’s meteoric rise thru the Tory party, there are questions to be asked about his background. At first glance, he ticks all the boxes. He’s the son of Punjabi immigrants via East Africa, (a GP and a pharmacist), brought up in Southampton, did well at School and University. He has proved a strong performer in debate and on TV.
However, that’s where he departs the norm. He is not your standard “son-of-immigrants” does well story. His path looks – lucky. He has Goldman Sachs and hedge fund experience on his CV. Most significantly, he is married to daughter of the 3rd richest Indian billionaire, Infosys co-founder Narayana Murthy, who is Modi-supporter and has a reputation for holding strong views. Sunak is, by default, a member of the Indian 0.00000001% – possibly the most unequal society on earth.
Sunak exploded into UK Conservative politics in 2015 after being parachuted into the safest Tory seat – Richmond, formerly William Hague’s. He’s said to have had his father-in-law canvass for him at election time. Call me suspicious, but how did he get the seat? What kind of influence might Narayana Murthy expect through him? Sunak is on the board of his Father-in-law’s business – Catermaran.
Its all about Credibility
This is the critical problem. To retain the credibility a sovereign country requires in order to access the global debt markets at the finest price, and to have full access to fiscal financing options, the Chancellor has to be seen as credible, above suspicion, and practical, leading a treasury seen above anything untoward. He needs to be seen above any suggestion of other “entanglements”. Sovereign debt markets are a function of how solid a country’s financial leadership is.
Its also about dissent. While Javid felt secure and able to question and challenge Boris and Cummings, Sunak is there to be their Yes-Man. That’s not necessarily a good thing when the UK needs a fiscal revolution.
I might be speaking out of turn, but at a time when the UK could use a healthy dose of fiscal stimulus and a massive amount of debt financing, I find myself concerned about the bona fides of the man hand-picked for the role. Sunak may be a fine politician and outstanding financier, but something feels awry about his appointment. Make up your own mind. Check out this article on Sunak from the Indian Business Standard.
I fear nagging doubts on the wisdom of a member of an Indian multi-billionaire’s family leading the UK’s Finance and Treasury. It could well cause future problems. I hope I’m wrong.
I guess I won’t be getting an invitation back to No 11 anytime soon, but I’m willing to listen and be persuaded my doubts are unfounded.
Bill Blain is a well-known City of London commentator, and has 35 years’ market experience as an investment banker. He currently is Strategist at Shard Capital, a London-based boutique.
Republished from the Morning Porridge by permission.