When Liz Truss resigned as prime minister Great Britain, the pound sterling recorded a slight increase, and the cost of 10-year British bonds showed a slight slowdown. In other words, (international) investors welcomed the “return” of the so-called troussonomics into the… time cabinet of History in a positive but cautious manner. However, at the same time, there were rumors about his return. Boris Johnson as Prime Minister of Great Britain, which served as a “handbrake” in the further de-escalation of the cost of British loans. Then, thus, a marathon began between the three gladiators to collect 100 signatures of Conservative deputies so that they could “claim” leadership in Conservative Party and the office of prime minister. The drama, however, came to an end on Monday, October 24 after Rishi Sunak collect the required 100 signatures. In fact, Sunak received the signatures of more than 50% of the Conservative MPs.

What problems is Sunak facing and when will the UK elections take place? I note here that elections must be held no later than January 2025. It is clear that Sunak would like elections to be held as soon as possible. And this is because, according to the Bank of England, the British economy is expected to contract in 2023 and in the first nine months of 2024. Further, the Bank of England estimates show zero growth (on an annualized basis) for the last quarter of 2024. At the same time, inflation is expected to return from the current 10.1% to 1.4% (i.e. below the 2% target) in the last quarter of 2024. In other words, January 2025 is rated as a “poor” month and more suitable for elections.

To avoid early elections, Sunak will need to keep the Conservative Party united.

But since Trusso-nomics has significantly shaken investor confidence in the UK economy, most analysts agree on a deeper recession in both 2023 and 2024. To avoid early elections, Sunak will have to keep the Conservative Party united. Difficult, but not impossible. Latest polls show Labor leading the Conservatives by 30 percentage points. Sunak understands finances and the markets trust him. In addition, it is speculated that Sunak may win the next election without clearing the “dung of the dawn” left behind by his predecessors. In other words, let’s not write off conservatives (yet).

* Mr Costas Milas is Professor of Finance at the University of Liverpool.