Financial markets welcomed the news Rishi Sunak will become new prime minister – but business leaders urged him to end the recent “political and economic uncertainty”.

The uncertainty was caused by his predecessor Liz Trussthe mini-budget for which she sacked former chancellor Kwasi Kwarteng before resigning after just 45 days in Downing Street.

It was announced on Monday afternoon that Mr Sunack had won the Tory leadership contest.

Ms Truss’s predecessor, Boris Johnson, has never formally announced his candidacy and has been evasive about whether he had enough support from Tory MPs. House of Commons leader Penny Mordaunt has dropped out of the race.

Markets had already largely anticipated – and reacted positively to – Sunak’s victory even before it was officially announced.

Ahead of the announcement, shares in the FTSE 100 initially rose as much as 0.5 percent before falling to nearly 0.8 percent. The FTSE recovered again in the afternoon, rising 1.1 percent.

Rishi Sunak, Penny Mordaunt and Boris Johnson

(Victoria Jones/Stephan Russo/Aaron Chown/Pennsylvania)

The pound initially fell against the dollar after the confirmation, but rallied about an hour later. By 3 p.m., one pound was trading at just over $1.13, up 0.25% on the day.

The interest rate the government pays on its 30-year advances fell 0.2 percent on the day to 3.8 percent, largely unaffected by Mr. Sunak’s victory.

The Bank of England’s deputy governor, Sir Dave Ramsden, told MPs on the Finance Committee that the recent improvement in gilt yields showed that confidence in Britain’s economic policy was returning.

Meanwhile, the British Chambers of Commerce and Industry (BCC) urged the former chancellor to work to strengthen the economy.

It said firms needed more certainty about energy support, finding workers and increasing exports.

BCC chief executive Shevan Haviland said: “The political and economic uncertainty of the past few months has caused huge damage to British business confidence and it must now end.

“The new prime minister must have a firm hand on the rupee to see the economy through the challenging environment ahead.”

The pound rose to $1.13 after news of Mr. Sunak’s victory

(Joe Giddens/Pennsylvania)

Kate Nicholls, boss of the British Hospitality Trade Organisation, said “stable political leadership is essential” and that the organization worked “very closely” with Mr Sunak when he was chancellor.

She added: “I would encourage him to extend business rate relief, reform the whole business rates system in the long term and reduce the current rate of VAT.”

Ruth Gregory, senior UK economist at Capital Economics, said Mr Sunak would have to “work hard to restore confidence in the eyes of the financial markets” as a recession was forecast.

Chancellor Jeremy Hunt, who succeeded Mr Quarteng, is expected to announce the spending cuts when he details his medium-term budget package on October 31.

While it had already “erased most of the Truss/Kwarteng tax policy from history, a fiscal hole of around £34bn remained”, Ms Gregory said.

She added that there is “a risk that the recession will end up being deeper or longer than we currently expect.”

On the other hand, Mr. Sunak must drop support for certain businesses if he wants to help cut emissions and keep his pledge to meet the government’s climate goals, said Kira Box, a campaigner at Friends of the Earth.

“Yet his record as chancellor, which has seen accelerated North Sea oil and gas production, reduced domestic flight charges and a weak windfall tax on fossil fuel companies, suggests otherwise.” , she said.