Whisper it, but UK may avoid meltdown this winter as Sunak gets luc…

Rishi Sunak: 'Pretty good chance things will get better' says Neil

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The Conservative Party’s internal war turned the UK into an international laughing stock, but it appears to be over with Rishi Sunak emerging as Prime Minister.

Judging by the events of recent weeks, Sunak is a lucky man.

Former PM Liz Truss may have beaten him in the Tory leadership campaign, but her disastrous spell at Number 10 did him all sorts of favours. 

The backlash against Chancellor Kwasi Kwarteng’s infamous mini-budget gave Sunak’s credibility a massive boost because he warned during the leadership campaign that “Trussonomics” would cause market turmoil.

It has also handed him a massive opportunity.

By claiming the nation now faces a “profound economic challenge”, Sunak can drive through the necessary £45billion of savings and pin the blame on Truss and Kwarteng.

The Labour Party may be hoping that voters will scorn Sunak because of his wealth and career as an analyst at Goldman Sachs and hedge fund manager.

Yet his financial background will work in his favour by soothing the global bond market.

This matters because so-called “bond vigilantes” are scouring the planet like a pack of hyenas, looking to separate sick and unhealthy beasts from the herd and pounce.

Truss and Kwarteng were correct in their diagnosis that the UK needs to grow, but their timing and strategy was poor.

This was not the time to add another £72billion to the nation’s debt, on top of the potential £150billion Energy Price Guarantee.

It was red meat to the bond market, who decided our spending was out of control and stopped buying UK gilts. Yet with Sunak and Hunt talking tough, the bond vigilantes have been appeased.

Now they will sink their teeth into the next straggler, probably Italy.

Here’s another reason why Sunak may be lucky. This year’s inflation shock has been fuelled by rocketing energy prices, as Vladimir Putin threatens supplies to Europe.

European states have scrambled to secure supplies for the winter, and have been largely successful. Storage facilities are now almost at total capacity.

Mild weather, falling consumption and rationing on the continent have cut energy demand.

This week, Europe’s wholesale natural gas prices fell below €100 (£86.60) megawatts-per-hour for the first time since June.

Some analysts have said that if this continues, Truss’s £150 billion Energy Price Guarantee may not cost Sunak a penny.

Lucky man.

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Now it looks like interest rates aren’t going to rise as much either, with Bank of England deputy governor Ben Broadbent lowering expectations last week.

After the mini-Budget, markets were pricing in base rates of 6.5 percent. Now they have reduced that to just 4.5 percent.

If correct, that will be good news for overstretched mortgage borrowers, and good news for Sunak, too. Falling gilt yields will save him an estimated £15billion, as the UK will pay less interest on its £2.4trillion debt.

These positive trends mean the upcoming recession may not be as deep or as long, either.

Napoleon famously liked to appoint lucky generals, in the belief that people largely make their own luck.

Yet luck does not last forever. Sunak’s is likely to run out at the 2024 general election (or sooner), as he has a mountain to climb overturning the Labour Party’s 30-point lead.

What our new PM needs to show is that his good luck can also rub off on the rest of us.

That’s a much harder task as living costs rocket.

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