Boris Johnson is the new prime minister: so what happens now?

The summer – August in particular – is normally a bit of a quiet time for the news cycle.
Corporate announcements are thin on the ground. Westminster closes down. Newspapers and PR agencies run on a skeleton staff.
Among other things, this reveals just how much “news” is nothing more than the recycling of announcements by companies, PR agencies, and government bodies – rather than hard-won “scoops”, for example.
Suddenly, the most tenuous of tales, and the most feeble excuses for consumer research, have a chance at their place in the front-page spotlight.
Well not this summer. This summer promises to be quite the rollercoaster.
And it’s all thanks to our new prime minister.
Theresa May isn’t the only familiar face that will be changing
Boris Johnson is Britain’s new prime minister, as expected. He beat his rival Jeremy Hunt comfortably – winning almost exactly two thirds of the vote.
So he’s got the firm backing of his party’s members, if not all of his MPs. And at least he can lay claim to one of the more decisive victories in a (semi-)public vote of the last five years or so.

So now that Johnson has laid claim to the prize he’s had his eye on for several years, what will he do with it? Will he get lucky and manage to hang onto it until better times arrive? Or will he end up like Gordon Brown – chronically undermining his predecessor, only to win a pyrrhic victory?
More importantly, what does it mean for the rest of us?
Well, in terms of things that could affect investors directly, one of the first things we’ll be getting is a new chancellor of the exchequer. Philip Hammond told Andrew Marr at the weekend that he’d be jumping before he was pushed. (To be clear, he didn’t use those specific words, but that’s what we knew he meant.)
Hammond won’t be the only one to get the chop. We can expect a full-blown cabinet reshuffle. That’ll generate a few headlines and probably some sterling volatility too.
But the new chancellor will be a particularly interesting mission statement from Johnson. I’d hope for (as always) someone who above all else, thinks we could do with a simpler, flatter, fairer tax system.
That’s probably too much to hope for, but I am hoping that whoever gets the role at least refrains from too much micro-management. One possible move which will catch everyone’s eyes, and no doubt be popular, would be to reduce to change the way that stamp duty works, to make it less of a barrier to moving.
We’ll see. Anyway, ultimately that’s all academic. All that really matters between now and the end of October is Brexit. And pulling that off is going to be a lot trickier than hiring a new chancellor.
But what’ll Johnson do about Brexit?
We’ll get our first proper taste of what might lie ahead tomorrow when Johnson officially takes over. Theresa May will say cheerio to the House of Commons after her final Prime Minister’s Questions. Then she’ll hand in her notice to the Queen. And then the Queen will hand it to Johnson.
Johnson will head over to Downing Street, and he’ll make a speech. It had better be a good one. I’d be surprised if he doesn’t talk about preparing for a “no-deal” Brexit, but we’ll see.
The cabinet will be formed on Thursday, and then Parliament will break up for the summer holidays. But how that will square with the limited time left before Brexit remains to be seen.
What we do know is that Johnson was always more of a Brexiteer than Jeremy Hunt. During the leadership election he emphasised that we’d have to leave by the end of October, with or without a deal agreed.
Now, you have to remember that when Hunt and Johnson were fighting for election, they only had to appeal to a small voter base. So Johnson could have simply been talking to those Conservative Party members who are ardently keen on Brexit. Now that he’s in power, he might take a softer tone.
However, what you also have to remember is that, more than anything, the country is sick of the Brexit limbo. Like it or not, Johnson has to deal with this. I think it’s fair to say that if there’s another general election and we’re no further forward with Brexit, then the Tories will lose badly, and they will probably have another very long spell in the wilderness.
The Brexit party would maul the Tory vote, while the LibDems would do the same to the Labour vote, and who knows what we’d end up with? In that scenario, a Jeremy Corbyn government is certainly a possibility, and that would be even more investor-unfriendly than all the other possible outcomes.
So one way or another, Johnson at least has to have a crack at it. And when you see it like that, you can see that even a “no deal” outcome is preferable (from his point of view) to ongoing stalemate. Which means that he has plenty of incentives to take a relatively hard line and to stall ahead of the deadline.
In all, I’d suggest checking out our guest post from Helen Thomas of Blonde Money from a couple of days ago which explained the game theory aspects of this very well.
I am, of course, biased, but I do rather think that now is a good time to make sure that you’re informed about what’s going on in the world, and what the effect might be on your investments. So, as we’ll have a lot more on this in MoneyWeek magazine over the next few weeks, I’d suggest that if you don’t already subscribe, you do so now – you can get your first six issues free here.

Leave a Reply

Your email address will not be published. Required fields are marked *