British prime minister Boris Johnson officially announced his resignation on Thursday. Johnson spoke to a crowd in front of 10 downing street saying he intends to remain in power until his conservative party appoints a new leader. Giles Coghlan, Chief Analyst, HYCM, joined Cheddar to discuss what led to his resignation and what this could mean for the UK economy.


Opening Bell

UK Prime Minister Boris Johnson Resigns

for more on this Giles Coughlin Chief analyst at H. Y. C. M. Joins us now, thank you so much for being here. And can you start off by taking us through the scandals, all of them that has mounted up to lead to this resignation of the british prime Minister, the scandal that broke the camel's back. The PM johnson was the chris pincher affair, essentially he appointed a deputy chief whip who was known to have some fairly unsavory activity that had happened with this gentleman. And PM johnson is alleged to have known exactly what was going on. There was a series of denials and then as those denials were uncovered, eventually it became clear that ministers were being asked to say things which were clearly not true and the real kind of reason that PM johnson has gone is not this individual affair. It's not even the previous affairs in isolation. It's more a culmination of slowly people realizing that actually not everything that PM johnson says can be trusted and that's giving into a wider problem that perhaps P. M. Johnson is more a people pleaser. He says what people want to say, I want to hear at that particular moment and then just hopes people don't ask too many questions. And so really that's really what's resulted in Pm johnson announcing his resignation because a number of his key staff were not prepared to support him any longer. And you could say it's the cost of living crisis, You could say it's the chris pincher affair. You could say it was the handling of the second lockdown of covid in the U. K. But none of them individually it's more the sum of the total parts have lead to ministers feeling that they can actually trust PM johnson's integrity and that's not to mention the party Gates that scandal where PM johnson was allegedly partying in In number 10 while the rest of the country was in Lockdown. And what you definitely could say is there's no shortage of reasons for the resignation in totality. There seems like an in hindsight. This seems like this was coming. Can you break down for our largely american audience? What happens next in the U. K. Government, A government that were closely tied to a major ally of ours? Yes. Now there is a fairly complicated procedure from here but it goes like this. There's now going to be a re election of a new Conservative leader that takes place with a series of votes in order to be put forward to be the new Conservative leader. You have to have the support of eight and members of parliament that support your application, you then have the first round of voting At the first round of voting. You need 5% of MPS to support you to go to the second round. If you get to the second round, You then need 10% of the Conservative Party to support you. And then if you get through that second round there's another series of rounds with the people with the least votes who have to exit the process until it's all whittled down to two candidates, then the entire Conservative Party and not just the mps, but the party as a whole get to vote on those two candidates. Now. Now, this is where it gets very interesting because at that point the new leader could call an early general election and if that new leader calls an early general election, expect there to be significant volatility in the pound, That is the biggest risk for the pound. So it would be the election of a new leader who wants to have the support of being voted in by the electorate. Because remember if you haven't been voted in by the electorate, you don't really feel you have the full support of the nation to really put through the programs that you want to and they're gonna need the support of the people to deal with all the issues, they're gonna have to clean up after this, especially with everyone watching the pound and during this inflation period we're going through. So let's just go back to yesterday, we reported that johnson's last Chancellor of Exchequer. Uh Well, he resigned in fact, 59 officials in Johnson's administration also resigned in the past 24 hours this morning, We're hearing a letter by a new chancellor is what ultimately led to johnson's decision to resign. Can you tell us a little bit more about that letter and who wrote it. Yeah, well, the it was that culmination of eventually people didn't feel they could trust PM johnson. Now, Richie Cenac is a pretty good egg. He's reliable. He's dependable. He's got a careful eye on the UK finances and is actually the favorite at the moment to replace PM johnson as the new Conservative leader. Now, the new Chancellor of Exchequer was obviously appointed. And you have to think about the politics here. This all of a sudden would give P. M. Johnson the ability to perhaps put more pressure on the new chancellor to put, you know, to cut taxes to make conditions easier to maybe borrow more money. But perhaps Rishi soon I was a little bit more cautious and more fiscally conservative. So you can see why the new chancellor says, actually that's not really a job I want. And also do I really want to be pushed and pulled in this way with so much volatility going on around PM johnson? You can see it's a it's an unenviable task and you may quickly find yourself being put into positions where you feel perhaps morally compromised. And I think that is largely why we're seeing such a number of resignations because yes, there's political questions, but there's also moral questions and when the politics are taking over more morality in such a strong way, People's sense of basic decency says? No, that's not something I want to carry on with. It certainly makes sense. How do you expect that this resignation will impact the U. K. Markets? Obviously you mentioned the british pound could be weighed on. Do you think the economy there is really ready for a change? Well, I think we're not gonna see any major moves in the pound really, unless we see an early election. That's my perspective. That's what I was speaking to my clients today about to say that, okay, yes, we have this political turbulence, but none of it is massively unexpected. I think since the party gate affair, people have been waiting for PM johnson to go. We could see some mild pound upside, say we got a rishi Cenac who came in. I think he could get quite a lot of support from people say he did a good job and we got a bit of momentum. I could see the pound gaining initially on that momentum, Whether it's sustained as a political question. But the big risk to the pounds would be two fold. It could go sharply higher or lower. And this is the outlook that I'd see if we see a early general election and a labor government comes in. If they look at taking us back into the European Union, I'd expect the pound of rocket higher. The footsie 100 to rocket higher. Any sense that a new party will take Britain back into Europe will be pound positive, will be footsie 100 positive. If we have a new election and labor commit to not taking UK back into the european union and the potential other winning parties commit to not taking europe Britain back into europe. And I see the pounds full lower on the uncertainty. That's the way that I'm seeing it at this stage. Okay. I go either way. So once we have a successor in mind, then we'll definitely have to have you back on to try to re analyze the pound of what's going to happen. Alright, thank you so much, Giles Coughlin, chief analyst for H Y C M.