Don’t expect Britain’s first hedge fund premiership to be smooth or enjoyable | Ed Conway
Rishi Sunak is not just our first British Asian prime minister, our first Hindu PM.
He is not just the youngest prime minister of the modern era. He is also the youngest since the Napoleonic wars and the first millennial PM.
Just as intriguingly, and possibly even more consequentially, he is Britain’s first hedge fund prime minister too.
Before he was a politician, Mr Sunak worked in finance, both at Goldman Sachs and Chris Hohn’s hedge fund – The Children’s Investment Fund Management. His time in the sector was relatively short, but it nonetheless makes for a CV quite unlike almost every other resident of 10 Downing Street.
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Markets shaped him. And now, at the very point when the rise and fall of certain benchmarks are influencing British politics more than in any era since at least the early 1990s, we have a prime minister who takes those markets unusually seriously.
Markets helped him through the door. For, in the end, what did for Liz Truss was the extraordinary response to her mini-budget, which contributed to a dramatic leap in interest rates on both government debt and mortgages. That in turn triggered a crisis in the gilt markets which underlie Britain’s financial system.
And markets have welcomed him. The news that Boris Johnson was pulling out of the leadership race was followed by a sudden rise in the value of the pound. When trading opened in government bonds this morning, they very quickly rallied. The implied interest rate on these bonds dropped sharply.
And since these markets are the foundations of the rest of the financial system, that had an instant effect on prices elsewhere. After the mini-budget, traders were expecting Bank of England interest rates to rise to well above 6% next year; this morning the expected peak dropped below 5% for the first time since that fiscal event.
At this stage you are doubtless wondering: why on earth does any of this matter? Why are we paying so much attention to the markets? Why (as some might put it) is Britain allowing the whims of the globalist elite – the “Davos consensus” – to shape its policy? Whatever happened to democracy?
And, frankly, you have a point. A democratic country’s policies should be shaped by politicians elected by its people. That’s part of the unwritten social contract that binds us.
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But the reality – depressing as it might be – is that the ability of those politicians to act is circumscribed by markets. They can, to give you a straightforward example, only borrow to the extent that investors around the world are willing to lend them money.
Markets matter not because they are right or wrong (that’s not how it works) but because that’s where the money is. And Britain, a country with enormous “twin deficits” on its current account and government account, is more reliant than pretty much any other developed economy on borrowing from those markets. This is just the way it is – ask anyone who worked at Goldman Sachs.
And that logic is worth keeping in mind as Britain’s first hedge fund prime minister takes office and begins to shape policy. Our ability to do what we want to do as a country is dependent on persuading the millions of investors around the world, taking second-by-second decisions on where to put their money, that we are on the right course. Other prime ministers (certainly the last couple) tried to ignore that; it’s unlikely that a “hedge fund prime minister” would.
However, the economic challenges that face Mr Sunak go well beyond the tick-tick-tick of a gilt chart. He enters Number 10 with the UK economy quite plausibly in recession. Energy costs remain at unprecedented highs (even though the wholesale cost of gas has fallen sharply).
So too do food prices and the costs of all sorts of household sundries. Further shocks from the Ukraine war seem highly likely. And on top of this, households will have to contend, in the coming year or so, with a very sharp increase in mortgage costs. Even the slight improvement in those interest rates since Mr Sunak became the odds-on favourite for PM does little to change that.
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Rishi Sunak’s rise to power
In short, even in a best-case scenario for the markets, the coming months for the UK economy are likely to feel grim, with households squeezed at every corner – more than they have been for decades. One can argue the toss over who bears the most responsibility for this – whether that’s the Tory party, central banks or, yes, markets. But that’s what we’re heading for.
Mr Sunak spent most of his time as chancellor doling out money during the pandemic. Normally in a recession, governments tend to “loosen fiscal policy” – which is to say, dole out more money.
But that brings us back to markets. Will those investors be relaxed about Britain borrowing more in the coming years? Will they be assured enough by the hedge fund credentials of the PM to give Britain the benefit of the doubt? Will Mr Sunak want to take that risk?
The past few weeks have been an astonishing ride in politics. We are now off the Truss rollercoaster. The Sunak journey might feel different; it might not have the same twists and turns; but don’t expect it to be especially smooth or enjoyable either.
The government has signalled that plans to bring a second runway at Gatwick into regular use will get the green light if environmental conditions are met.
Transport Secretary Heidi Alexander said she was “minded to approve” the airport’s plans but the deadline for a decision had now been pushed back until the end of October.
The main stumbling blocks facing Gatwick’s proposals are related to its provisions for noise prevention and public transport.
The Planning Inspectorate had made recommendations in those two areas after initially rejecting the scheme.
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The airport welcomed the government’s statement but did not say whether it saw a need to adjust its plans to meet the conditions.
Gatwick has until April 24 to respond to the new proposals.
The northern runway already exists at the airport parallel to the main one, but cannot be used at the same time as it is too close.
It is currently limited to being a taxiway and only used for take-offs and landings if the main one has to shut.
Gatwick wants to move it 12 metres further away to solve this problem.
The northern runway is currently only used for emergencies or where the main one is closed. Pic: PA
It says being able to run both at the same time would allow around 100,000 more flights per year and create 14,000 jobs.
Gatwick says the £2.2bn project would not need government money, would be 100% privately funded, and could be complete by the end of the decade.
The airport is already the second busiest in the UK, and the busiest single runway airport in Europe.
Campaigners argue the additional traffic would be catastrophic for the environment and the local community in particular.
Today’s update comes after the chancellor said last month the government also supported a third runway at Heathrow as part of its wider effort to bolster UK economic growth.
However, the formal planning process is still to take place.
Gatwick’s additional runway would be unlikely to open until the end of the decade, assuming any legal challenges were swiftly overcome.
A government source told Sky News: “The transport secretary has set out a path to approving the expansion of Gatwick today following the Planning Inspectorate’s recommendation to refuse the original application.
“This is an important step forward and demonstrates that this government will stop at nothing to deliver economic growth and new infrastructure as part of our Plan for Change.
“Expansion will bring huge benefits for business and represents a victory for holidaymakers. We want to deliver this opportunity in line with our legal, environmental and climate obligations.
“We look forward to Gatwick’s response as they have indicated planes could take off from a new runway before the end of this Parliament.”
Stewart Wingate, Gatwick’s chief executive, said: “We welcome today’s announcement that the Secretary of State for Transport is minded to approve our Northern Runway plans and has outlined a clear pathway to full approval later in the year.
“It is vital that any planning conditions attached to the final approval enable us to make a decision to invest £2.2bn in this project and realise the full benefits of bringing the Northern Runway into routine use.
“We will of course engage fully in the extended process for a final decision.”
He added: “We stand ready to deliver this project which will create 14,000 jobs and generate £1bn a year in economic benefits. By increasing resilience and capacity we can support the UK’s position as a leader in global connectivity and deliver substantial trade and economic growth in the South East and more broadly.
“We have also outlined to government how we plan to grow responsibly to meet increasing passenger demand, while minimising noise and environmental impacts.”
A spokesperson for campaign group Communities Against Gatwick Noise Emissions (Cagne) responded: “We welcome the extension by the secretary of state until October as she has obviously recognised the many holes in the Gatwick airport submissions during the planning hearings.
“Cagne do not believe Gatwick has been totally up front with their submissions, and the planning hearings left so many questions unanswered.”
Greenpeace UK’s policy director, Doug Parr, said of the process ahead: “By approving Gatwick’s expansion the government will hang a millstone the size of a 747 around the country’s neck.
“Such a decision would be one that smacks of desperation, completely ignoring the solid evidence that increasing air travel won’t drive economic growth. The only thing it’s set to boost is air pollution, noise, and climate emissions.”
Nvidia has signalled no drop in demand for its flagship chips among big artificial intelligence (AI) spenders despite the low-cost challenge posed by Chinese rival DeepSeek.
The leading AI chipmaker said it expected Blackwell sales to continue to grow after its latest earnings beat market expectations.
Nvidia forecast revenue of around $43bn (£34bn) for its first quarter after achieving a figure of $39.3bn (£31bn) over its last three months – up 12% from the previous quarter and 78% from one year ago.
Just a month ago, its shares took a hammering when it emerged DeepSeek‘s primary chatbot, which uses lower-cost chips, had become the most popular free application on Apple’s App Store across the US.
Nvidia’s shares lost almost $600bn in market value in a day.
It also prompted investors to question whether the AI-led stock market rally of recent years was overblown.
There was anxiety ahead of Nvidia’s earnings report though shares only fell fractionally in after-hours dealing.
Market analysts suggested demand from Microsoft, Amazon and other heavyweight tech companies racing to build
AI infrastructure remained robust, given Nvidia’s revenue guidance even though the bulk of it is accounted for through data centres.
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Nvidia founder Jensen Huang said Nvidia has ramped up the massive-scale production of Blackwell and achieved “billions of dollars in sales in its first quarter”.
“Demand for Blackwell is amazing as reasoning AI adds another scaling law – increasing compute for training makes models smarter and increasing compute for long thinking makes the answer smarter.
“AI is advancing at light speed as agentic AI and physical AI set the stage for the next wave of AI to revolutionise the largest industries,” he said.
Derren Nathan, head of equity research at Hargreaves Lansdown, said of the report: “The longer-term investment case for the driver of the AI train is looking difficult to pick holes in, with Meta’s $200bn just one of the latest mega investments in data centres to be unveiled recently.
“By virtue of scale, growth may be slowing a little but upgrades to analysts full-year numbers can be expected off the back of today’s results. At a around 30x forward earnings, the valuation still doesn’t look overcooked.”
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