Johnson Pulls Out of UK Leadership Race, Leaving Sunak Ahead

(Bloomberg) — Boris Johnson pulled out of the contest to lead the UK’s ruling Conservative Party, leaving Rishi Sunak on the brink of becoming the next prime minister.

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Johnson, who left office last month after a series of scandals rocked his premiership, said returning to No. 10 Downing Street “would simply not be the right thing to do” because of the chances it would divide the party.

“You can’t govern effectively unless you have a united party in Parliament,” Johnson wrote in a statement on Sunday. “The best thing I can do is not allow my nomination to go forward.”

The decision leaves Sunak facing House of Commons Leader Penny Mordaunt in the contest, with the former chancellor of the exchequer having the public support of key Tory members of Parliament. Mordaunt is staying in the race, a person familiar with the matter said after Johnson’s exit.

Whoever wins will face the task of trying to bring unity to a party that has been through months of upheaval and bruising public infighting. Conservative support has fallen well behind the Labour opposition in polls as a brutal cost-of-living squeeze and soaring inflation darkens the economic outlook.

The pound extended gains after Johnson said he wouldn’t stand, rallying as much as 1.0% to $1.1401 in early Asia trading on expectations that a potential Sunak premiership would be better qualified at trying to fix the nation’s finances.

Prime Minister Liz Truss’s decision to step down triggered the contest, following weeks of turmoil with investors dumping the pound and UK government bonds. Her economic plan, including a big boost in borrowing to pay for tax cuts, rattled markets and turned voter sentiment further against the Tories.

The possibility that Johnson could return to office after leaving less than two months ago was the latest twist in the upheaval of British politics that followed the 2016 vote to leave the European Union.

Johnson cut short a holiday last week to consider a run for his old job, rallying the support of cabinet ministers including Business Secretary Jacob Rees-Mogg. While he remains popular with Tory members, MPs are divided about his legacy and worried that returning him to office would revive all the scandals that bought him down.

Johnson insisted he had the support to go forward to a ballot of the members but said that doing so might deepen splits within the parliamentary party.

“I led our party into a massive election victory less than three years ago,” Johnson said. “There was a very good chance I would be successful in the election with Conservative Party member. 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.”

The Conservative Party set a deadline of 2 p.m. Monday for leadership contenders certify the support of at least 100 Members of Parliament each to go forward to a ballot. If there’s more than one candidate running by the end of Monday, Tory Party members will have the final say in an online vote, with a result due on Friday.

Johnson didn’t endorse anyone, saying he’d support whoever wins. While Sunak has a commanding lead, there are some scenarios where Mordaunt could emerge as the favorite of Tory members.

Sunak has at least 123 lawmakers behind him, compared to Boris Johnson’s 51 named backers, according to Bloomberg’s tally, which counts only 23 for Mordaunt. She told Sky News she’s confident of her support, and it’s possible those backing Johnson will move to her camp.

In a short tweet, Sunak highlighted some of Johnson’s apparent achievements, including delivering Brexit and the Covid vaccine roll-out.

Sunak lost to Truss in the leadership battle to replace Johnson, with Tory members concerned about his role in Johnson’s downfall and his decision to raise taxes to the highest level since World War II. There’s also unease about his personal wealth and his aggressive attacks on Truss during that contest.

Mordaunt served as trade secretary before being promoted to lead the House of Commons. Her star has been rising since she joined in the last leadership battle when Johnson stepped aside. Her confident performances in the lower house and optimistic outlook generated talk she could help Conservatives move beyond Johnson-Sunak controversies.

In the contest that installed Truss as premier, Mordaunt placed second to Sunak — and ahead of Truss — in every round of voting among her MP colleagues until the critical one. In July, a ConservativeHome website survey of party members ranked Mordaunt second behind Defense Secretary Ben Wallace on who should be leader.

Those factors may make Mordaunt reluctant to step aside.

Growth and Prosperity

In a column for the Telegraph newspaper, Mordaunt wrote she’d focus on cutting taxes and raising productivity to “deliver growth and prosperity” across the nation, a pitch similar to what Truss offered.

“I understand the challenges families are facing, and I know how difficult things are when household budgets are squeezed, the cost of living goes up and public services just don’t seem to be there,” Mordaunt wrote.

But Tory leaders are concerned at the growing economic crisis starting to engulf the UK. A closely-watched survey due Monday morning is likely to show a recession is deepening as inflation lingers at its highest level in 40 years.

A burgeoning budget deficit has left the current chancellor, Jeremy Hunt, warning about difficult decisions ahead. He’s due to deliver a major statement on the Treasury’s tax-and-spending plans on Oct. 31, a date picked to better inform the Bank of England on how quickly it raises interest rates.