Rishi Sunak, former chancellor, was on Monday on course to become Britain’s new prime minister, after Boris Johnson quit the contest on Sunday night and markets heaved a sigh of relief.
Sterling rose on Monday after the risks of further immediate political and economic upheaval receded. Johnson, who was struggling to win support, admitted that if he had won he could not have governed “effectively” because of splits among Tory MPs.
Sunak will become Tory leader at 2pm on Monday if Penny Mordaunt, leader of the House of Commons and his only remaining rival, fails to win the 100 nominations from Tory MPs needed to enter the contest.
According to the FT’s tracker of publicly declared nominations, Mordaunt has so far only received 25 public backers. Some of her colleagues urged her to fold her campaign and back Sunak after Johnson pulled out of the race.
“Some of us think she should fold in behind Rishi as soon as possible in the interests of unity and stability,” said one MP backing Mordaunt.
However, Mordaunt has indicated she is still fighting for every vote. A spokesman for her campaign insisted on Sunday night: “Penny is still running to be the leader of the Conservative party.”
Sunak’s campaign was further bolstered on Monday by the endorsements of two senior Tories: Michael Gove, the former levelling up secretary, and ex-home secretary Priti Patel.
If Sunak does end up as the only candidate with 100 nominations he is expected to be invited to form a government by King Charles later on Monday, replacing Liz Truss in Number 10.
However, if Mordaunt does reach the required threshold, MPs will hold an “indicative vote” later on Monday to send a signal to party members as to which of the two candidates they want to see win the contest. Voting would then be thrown open to party members in an online ballot, with the result announced on Friday.
Sunak remains a divisive figure in the party and is blamed by many Tory MPs and party members for helping to topple Johnson in July.
But he is seen by the markets as being committed to sound economic management — a new debt-cutting plan is scheduled to be announced by new chancellor Jeremy Hunt on October 31 — and more likely to oversee better relations with the EU than Johnson.
Sterling kicked off the week on a strong note after Johnson dropped out of the contest. The pound gained 0.3 per cent against the dollar to reach $1.1336 in morning trading in London, and advanced 0.6 per cent against the euro to €1.1525.
Ulrich Leuchtmann, head of currency research at Commerzbank, said Johnson’s exit removed one of the political risks that had been hanging over the UK currency. He said Johnson’s return to the premiership could have prompted a flare up in tensions with Europe over post-Brexit agreements.
“In addition to all the monetary and fiscal policy risks of the past weeks the one major factor still putting pressure on sterling remains: Brexit and its consequences,” Leuchtmann said.
Johnson startled his team at 9pm on Sunday night by announcing he would not run for the leadership, even though he claimed he had the 100 nominations — plus a proposer and seconder — to enter the contest.
Many Tory MPs were highly sceptical that Johnson had the numbers. On Sunday, the number of declared backers for the prime minister was stuck at little more than 50.
Johnson claimed he could have won the contest because of his appeal to the party membership but that he had stood aside in the interests of the Conservative party and the nation.
He said: “There is a very good chance that I would be successful in the election with Conservative party members — and that I could indeed be back in Downing Street on Friday.
“But in the course of the last days I have sadly come to the conclusion that this would simply not be the right thing to do. You can’t govern effectively unless you have a united party in parliament.”
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