REACTION FROM FINANCIAL MARKETS:

PHILIP SHAW, CHIEF ECONOMIST, INVESTEC

"It's increasingly difficult for the prime minister to hang on. It seems quite similar to what happened to Theresa May when Boris Johnson and David Davis resigned in fairly close proximity to one another over Brexit.

"The initial gut reaction would be... to sell the currency. However, the UK is evidently not the only economy in a precarious or fragile position. One could argue that the UK will take a less confrontational approach towards the EU negotiations which could lower the perceived threat of a trade war or trade actions."

KENNETH BROUX, FX STRATEGIST AT SOCIETE GENERALE

"This brings the crisis in the cabinet to a head. This means that is difficult to for PM Johnson to hang on.

"The pound and the euro has already had a bad day in the office and we could see a bit more of a reaction tomorrow. The implications for the pound and UK assets is more about the macro backdrop such as BoE and evolving inflation outlook and this shouldn't exaggerate the pressure on the downside for sterling and UK assets."

DAVID OWEN, CHIEF ECONOMIST AT SALTMARSH ECONOMICS

"On a three-month view this could be positive for UK assets as we could get more fiscal easing in the autumn. It could clear the air and bring a more stable backdrop. But near term, it depends on the political backdrop."

JORDAN ROCHESTER, FX STRATEGIST AT NOMURA

"When your Chancellor and Health Secretary both resign – it’s only a matter of time before a Prime Minister is out.

"The new leader will want to win over voters and the Tory party - so perhaps down the line we see fiscal subsidies for energy and tax cuts to win over the Tory faithful.

"But first you need an actual winner of a leadership contest this can take roughly up to six to eight weeks or so (...) then after that we wait for the decisions by a new chancellor.

"The irony is if Boris doesn't plan to resign today or tomorrow – we’ll need to know who is the interim Chancellor!

"So the upside risk is if Boris stays and we have a much less fiscally frugal replacement for Sunak. It's not impossible."

VIRAJ PATEL, MACRO STRATEGIST AT VANDA, ON TWITTER

"Buy $GBP... end of Boris Tory govt? Or sell $GBP... because the Chancellor knows something we don't Either way UK politics just got messier & history suggests that FX markets hate political uncertainty. P.S. Doubt this really matters."

BIPAN RAI, FX STRATEGIST AT CIBC CAPITAL MARKETS

"Even if Sunak and Javid had stayed in power, I don't know if that would address anything that was really tied to the underlying problem with the UK economy as a whole, which is the fact that it's undergoing a cost-of-living crisis.

"At the same time, you've got the Bank of England really dragging its heels when it comes to tightening policy compared to the rest of the world.

"So the fact that we've had two significant resignations is very important from a political perspective.

"I'm just not sure that really matters for sterling at this point. From the monetary policy perspective it's still quite a bear sterling story."

POLITICAL REACTION

KEIR STARMER, LEADER OF THE OPPOSITION LABOUR PARTY

"After all the sleaze, the scandals and the failure, it's clear that this government is now collapsing.

"Tory cabinet ministers have known all along who this prime minister is.

"They have been his cheerleaders throughout this sorry saga: backing him when he broke the law, backing him when he lied repeatedly and backing him when he mocked the sacrifices of the British people.

"In doing so, they have been complicit every step of the way as he has disgraced his office and let down his country.

"If they had a shred of integrity they would have gone months ago."

NICOLA STURGEON, SCOTLAND'S FIRST MINISTER AND SNP LEADER

"Feels like end might be nigh for Johnson - not a moment too soon.

"Notable though that the resigning ministers were only prepared to go when they were lied to - they defended him lying to public. The whole rotten lot need to go. And Scotland needs the permanent alternative of independence."

ED DAVEY, LIBERAL DEMOCRATS LEADER

"A House of Cards built on lies and deceit comes crashing down. Go and go now. You have discredited our great country long enough."