Britain after Boris

This is an audio transcript of the FT News Briefing podcast episode: Britain after Boris

Marc FilippinoGood morning from the Financial Times. Today is Friday, July 8th, and this is your FT News Briefing.

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Marc FilippinoThe political pressure finally caught up with Boris Johnson.

Boris JohnsonIt is clearly now the will of the parliamentary Conservative party that there should be a new leader of that party and therefore a new prime minister.

Marc FilippinoAnd commodities have been going up, up, up. But the story has become a bit more complicated. I’m Marc Filippino and here’s the news you need to start your day.

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Marc FilippinoAfter mounting pressure from lawmakers, UK prime minister Boris Johnson yesterday finally resigned as leader of the ruling Conservative party.

Boris JohnsonI know that there will be many people who are relieved and perhaps quite a few who will also be disappointed. And I want you to know how sad I am to be giving up the best job in the world. But them’s the breaks.

Marc FilippinoJohnson said he’ll stay on as prime minister until a new leader is chosen. His decision came after dozens of his ministers and other Tory lawmakers quit in an attempt to force him to resign. Johnson has been dogged by scandals over the past few years, but the final straw was his decision to promote an ally who was facing sexual misconduct allegations. For more insight, I hosted a Twitter Space discussion yesterday with the FT’s Robert Shrimsley, he’s our UK chief political commentator, and Stephen Bush, he writes an FT column on British politics. Here’s part of the conversation.

Robert, the conservatives are gonna have to figure out who’s gonna lead the party. Do we have any contenders?

Robert ShrimsleyAre there any contenders? I think the bigger question is, aren’t there any contenders? There are so many people potentially putting their hat into the ring. The key figures I would cite, you have the two men who resigned, Rishi Sunak and Sajid Javid, who can say, look, we actually took a stand. We were brave. You have the new chancellor of the exchequer, Nadhim Zahawi and the current foreign secretary, Liz Truss, both of whom will run from this Thatcherite economic position. I think it’s gonna be a bit of a shake-up in the next few days as candidates get the law of the land and get a sense of what are the issues that are going to drive this contest. And it seems to me there are a few. The first is the issue of integrity and a commitment to doing things better, not lying, which obviously everybody will promise to do. Then you have the people who, like again Nadhim Zahawi, who’ll run on a strong tax cutting agenda. And Rishi Sunak, the chancellor, is much more fiscally orthodox. And one of the reasons why he lost popularity is because he kept putting up taxes to pay for spending and believing that books have to be balanced. You will definitely have the issue of climate change policy. It’s an important point about Boris Johnson that unlike, for example, Donald Trump, although he isn’t quite a populist conservative, he never, ever resiled from the climate change agenda. Then you’ll have issues like who’s gonna be hardline on Brexit, because there are many in the Conservative party who would like to see a slightly less confrontational approach. But on the other hand, that it will too much of awkward relationship with the European Union because the party is a party of Brexit. But as you can see just from me blathering a bit, a bit here, you’ve got a lot of people, a lot of issues to unpack, and it’s gonna take a few days before we can really be clear which ones are the absolute frontrunners.

Marc FilippinoYou’ve mentioned Trump, and it’s hard not to draw the comparison.

Robert ShrimsleyI don’t actually buy this. I . . . 

Marc FilippinoReally?

Robert ShrimsleyI think these comparisons are much too easy. I mean, the fundamental impact that Boris Johnson’s have on the Conservative party is Brexit. Everything else the Conservative party has done has been fairly mainstream for certainly for a Conservative party. In British politics, Brexit was the outlying issue and then the disrespect of the institutions and the rules of law. Boris Johnson, I think, is much more of an aberration within the Conservative party in his unconventionality and his disregard for rules. And I think that kind of stuff will go. And fundamentally also, the truth is different in the Conservative party and the Republican Party is that while the Conservative party may have taken a very long time to act against him, they did act against him, whereas the Republican Party never got around to acting at Donald Trump.

Marc FilippinoDoes Johnson’s departure signal anything to the rest of the world, espe . . .

Robert ShrimsleyIs that me or Stephen, you’re asking?

Marc FilippinoDealer’s choice.

Robert ShrimsleyLet’s give another guy first. (Laughter)

Stephen BushOh OK. I’m . . . (Laughter)

Marc FilippinoI can skip this one if you want, I guess.

Stephen BushI’m not convinced it does signal all that much, right, you know. I’m gonna do what columnists love to do, I’m gonna do a broad and deeply flawed generalisation, which is essentially, if you basically say that there are three types of democracy, dominant party one’s way, whether you’re Sweden or yeah, the United Kingdom, a country where one party wins a heck of a lot more than any of the others. And then you have ones like the United States say, where broadly the two parties are in office, a roughly equal amount of time. And in some ways, right, the success of the Conservative party is, you know, like Madonna, it has always found a way to adjust to different times. And I think then in some ways all we’re seeing at the moment is the Conservative party doing its regeneration-y thing that I think doesn’t teach us all that much about the global picture, because in most of the democracies they are more competitive than UK elections have tended to be, historically speaking.

Marc FilippinoRobert, I know you gotta hop off in two minutes. So I’m gonna do this question that everybody loves to hate. How will history look back on Boris Johnson and the time that he was prime minister?

Robert ShrimsleyWell, he has a promise of obvious historical significance. You know, there are plenty of promises that we forget about. We’re not gonna forget about Boris Johnson in a hurry. He is the prime minister who delivered Brexit. They will judge it in the way that they judge Brexit. If Brexit is deemed to be the economic disaster or at least the economic slow puncture that many, including me, think it will be, and is. If it ends up breaking up the union because it speeds up, as example, Scottish independence, then Boris Johnson be remembered as the man who broke up the UK and delivered a disastrous economic policy. If you’re one of those people who thinks actually Brexit will come right in the end, then he will be remembered more favourably. But I have to say he will be remembered. That’s for sure.

Marc FilippinoStephen, same question for you.

Stephen BushWell, I think in lots of ways, he’s the kind of fascinating mirror image of Edward Heath, who was British prime minister from 1970 to 1974. Edward Heath’s government did one very big thing which changed the UK economy, which was to take us into the then European Economic Community, now the EU. And in some ways, right, we have you know, prime minister’s victory in the 2019 election did, at least for the short term, set us on this granite-hard Brexit. He is, I think, a similarly consequential prime minister. But to slightly disagree with Robert, I think it’s worth noting then the fact I have to explain who Ed Heath was does show then just because you are economically consequential doesn’t mean that you’re remembered. And I think there’s a good chance that actually Boris Johnson becomes one of that kind of fun, usable list of, you know, the multiple Conservative prime ministers who governed the country from 2010 to 2020-something or 2030-something.

Marc FilippinoThat was Robert Shrimsley, the FT’s UK chief political commentator and UK editor at large, and Stephen Bush, an associate editor and political columnist for the FT. We spoke yesterday in a Twitter Space about Boris Johnson’s resignation. You can listen to the whole Twitter Space discussion if you’re interested. We’ll have the link in the show notes.

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Marc FilippinoWe talk a lot about inflation. It’s just the elephant in the room these days. Fast-rising prices are roiling economies and governments, and underneath many of the consumer price rises are skyrocketing commodities. Everything from oil to grain to metals have been going up and fast. But over the past two weeks, commodity prices have fallen. To talk about what’s going on and what this might mean for inflation, I’m joined by the FT’s financial reporter, Ethan Wu. Hey, Ethan.

Ethan WuHi, Mark.

Marc FilippinoSo, Ethan, why are commodity prices falling? What’s going on?

Ethan WuAs best we can tell, it looks like hedge funds, right, companies that speculate on the direction of commodities prices, are making big bets that commodities are going to fall. You know, previously they had been betting that the price was going to go up, that there were all these shortages all around the world, that there’s gonna be lots of demand. And now they’re reversing that bet. They’re saying it’s actually gonna go down.

Marc FilippinoSo just to clear things up, we’re talking about the futures market here. These are the bets that hedge funds are placing now, thinking that maybe, you know, down the line they’ll cash in on prices being lower. Right?

Ethan WuRight. I think it’s important to distinguish that there are futures markets where financial instruments are traded by hedge funds. And then there’s the physical markets where people are actually trading bushels of wheat or barrels of oil. And these are related, but not necessarily the same. Both markets have moved. You’re seeing commodities prices falling in both sides of the market. But because this is a speculative change, because there has not really been a fundamental shift in how many commodities there are or how many commodities the world is currently demanding, you could see pretty violent price reversals. And so we saw a little bit of that yesterday. Prices bounced back from the big drop over the last two weeks, not enough to recover the pretty steep losses. But I think it shows that these markets are very uncertain. They’re highly volatile and speculative trades have a tendency to unwind if they’re wrong.

Marc FilippinoSo why are hedge funds betting against commodities right now?

Ethan WuHedge funds are worried that a lot of the bad economic data that we’ve gotten from lots of different countries over the past couple of weeks makes it look like the world is headed for a recession. And I know the News Briefing has had on Martin Wolf, who’s a lot better on this than I am. But the general point is that if, you know, if economies fall into recession, there’s less demand for physical commodities all around the world. If there’s less demand, it’s not gonna fetch as high of a price. And so, you know, that’s not guaranteed that there’s gonna be a global recession. It’s not guaranteed that demand is going to fall off. But it’s at least like an educated bet that you could make. And if you’re right, as a hedge fund, make a lot of money off that trade.

Marc FilippinoEthan Wu is our financial reporter. He also writes our Unhedged newsletter with our buddy Rob Armstrong. We’ll have a link to that in the show notes. Thanks so much, Ethan.

Ethan WuThank you, Mark.

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Marc FilippinoYou can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Sonja Hutson, Fiona Symon and me, Marc Filippino. Our editor is Jess Smith. We had help this week from Michael Lello, David da Silva, Peter Barber, Gavin Kallmann and Breen Turner. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. And our theme song is by Metaphor Music.

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