O Rishi Sunak takes the third post of prime minister United Kingdom from the Conservative Party in just four months, a role that is increasingly like bitter glass. His victory leaves him with an explosive mixture of challenges, from the winter economy to lingering pressure on the energy market and his split party, which is weakening in the polls.

Markets that have lost confidence in the government and are especially sensitive to fiscal changes in a difficult period will closely watch every step of the new British prime minister. Recent data showed that private sector activity eased in October, with other disappointing data ahead of last week’s weak retail sales. Meanwhile, households are grappling with a deepening cost-of-living crisis.

The markets will be watching the new prime minister’s every move closely, while British households will groan at the accuracy.

As the prices of goods and services rise faster than wages, workers and their families have less money to spend. Real incomes fell almost 3% last year. On top of that, Rishi Sunak needs to tread carefully on the fiscal front to avoid another sharp bond market reaction. The recent turmoil there, following his predecessor’s unjustified tax breaks, has caused bond yields to skyrocket, impacting the cost of borrowing not only for the government, but also for households and businesses.

Another headache for Rishi Sunak is the energy crisis. Persistently high energy prices due to Russia’s invasion of Ukraine will create problems for both businesses and households when state support is withdrawn in April 2023. If prices do not fall by then, or if an alternative bailout program is introduced to mitigate the effects of high energy prices. , then according to some forecasts, inflation could reach 15% or more. Household electricity bills could double. In addition, the steady rise in the cost of mortgages is one of the problems that Sunak will inherit. And in public services, their chronic underfunding and the growing discomfort of government officials make spending cuts moot, limiting discretion.

In the UK, many strikes have already been organized over the summer due to low wage growth, and unions are rejecting new austerity programs. Rishi Sunak will have to balance the need for budget cuts without provoking more strikes this winter with the ability to provide Labor opponents with arguments to use against him.