Like his predecessor Rishi Sunak, Sahabi will face pressure to spend more and cut taxes from lawmakers in Prime Minister Boris Johnson’s Conservative Party, which has seen the party’s popularity plummet.
The former education minister – who co-founded opinion polling firm YouGov before entering parliament – will have to play a key role in resolving the still-unfinished Brexit deal with Great Britain and the EU.
A deadlock over trade rules for Northern Ireland would further hamper exports to Britain.
The International Monetary Fund predicted in April that Britain will face slower economic growth and persistent inflation in 2023 than any other major economy in the world.
Since then, the pound has fallen further, hitting a two-year low against the US dollar on Tuesday, adding to inflationary pressures in Britain.
Inflation hit a 40-year high of 9.1 percent in May, and the Bank of England predicts it will hit 11 percent in October.
Britain’s gross domestic product shrank in April and is expected to contract throughout the second quarter, as the Bank of England raised interest rates and a loss of confidence among households and some businesses.
In the short term, most economists believe it will avoid the technical definition of a recession – two consecutive quarters of contraction – thanks in particular to the latest emergency measures to support the cost of living announced by Sunac in May.
But with growth likely to stall next year, Conservative Party lawmakers have called for cuts to value-added tax in the autumn – a move that could cost tens of thousands of pounds.
That would be on top of Britain’s public debt, which topped 2 trillion pounds ($2.39 trillion) during the coronavirus pandemic and is now 96% of GDP.
Johnson and Sunak have often been reported to be at odds over how much the government should borrow.
In announcing his resignation on Tuesday, Sunac – who has often stressed the importance of fiscal consolidation – said it was clear to him that his approach to managing the economy was “fundamentally very different” from Johnson’s.
Sarah Heavin, senior economist at Standard Chartered, said it was difficult to see how Johnson could remain prime minister just before Zahavi’s appointment.
“If he hangs on, markets can expect big tax and spending gifts now that Rishi Sunak is gone, which will increase pressure on the BoE to do more, which will support the pound,” she said.
($1 = 0.8363 pounds)
Prone to fits of apathy. Unable to type with boxing gloves on. Internet advocate. Avid travel enthusiast. Entrepreneur. Music expert.