Liz Truss won the race to lead Britain on Monday as the Conservative Party elected her its new leader, embracing her tax-cutting agenda and giving her the task of lifting the country out of its deepening economic malaise.
Queen Elizabeth II will appoint Ms Truss, 47, as the 15th prime minister of her 70-year reign on Tuesday, after Boris Johnson formally tenders his resignation.
She has vowed to get to work straight away to tackle the cost of living crisis, and on Thursday is expected to announce a plan including tax cuts and a freeze on energy bills.
Ms Truss will be Britain’s third female prime minister after Margaret Thatcher and Theresa May.
She defeated rival candidate Rishi Sunak after a two-month leadership contest that played out against the backdrop of a worsening economic picture, war in Ukraine and an 80 per cent rise in energy bills.
The pound dropped to its lowest level since 1985 on Monday and benchmark FTSE 100 ended flat amid concerns from investors over whether Ms Truss's plans to lower taxes are affordable.
Sterling initially gained a little ground after the midday announcement, but quickly pared back those gains, trading down slightly at 1.1483 against the dollar in the afternoon.
The final round of the contest saw Ms Truss win 81,326 votes (57 per cent) from Conservative members, compared to 60,399 (43 per cent) for Mr Sunak.
Another nine candidates entered the race to succeed Mr Johnson but failed to gather enough support from MPs in the early rounds of voting.
“I campaigned as a Conservative and I will govern as a Conservative,” Ms Truss said to cheers from party members in an acceptance speech in which she promised to tackle pressing challenges for the economy, energy and health.
“We will deliver, we will deliver and we will deliver."
Mr Johnson urged Conservatives to unite behind the new leader, while Ms Truss paid tribute to the departing prime minister and his staunch support for Ukraine, saying: “You were admired from Kyiv to Carlisle.”
Tory MPs, former prime ministers and her soon-to-be fellow world leaders offered support to Britain's new leader as she takes on a formidable set of challenges.
German Chancellor Olaf Scholz said he was looking forward to “co-operation in these challenging times”, while Australian Prime Minister Anthony Albanese said he hoped for a “continued constructive relationship and friendship”.
European Commission president Ursula von der Leyen made a pointed reference to ongoing UK-EU tension over Northern Ireland, saying she hoped for a constructive relationship “in full respect of our agreements”.
French President Emmanuel Macron has congratulated Liz Truss on winning the battle to become the next UK prime minister.
Ms Truss told Tory members at a leadership hustings in Norwich in August that she was undecided as to whether the French leader was “friend or foe”.
“Congratulations to Liz Truss on her election,” Mr Macron tweeted.
“The British people are our friends, the British nation is our ally. Let us continue working together to defend our shared interests.”
Ukraine's President Volodymyr Zelenskyy said he hoped Britain's new leader would help Kyiv to spoil Russia's plans.
"I believe that together we will be able to do more to protect our peoples and to thwart all Russian destructive efforts," Mr Zelenskyy said in his daily address.
Mr Sunak, who won the most support from MPs in the early rounds but failed to win over party members, said it was “right that we now unite behind the new PM … as she steers the country through difficult times”.
Ms Truss, an anti-monarchy liberal in her youth who evolved into an admirer of the late Mrs Thatcher and standard-bearer for the Conservative right, inherits a 71-seat majority in Parliament but will have no political honeymoon as Britain heads into a difficult winter.
Behind in the polls with the next general election due in 2024, the Conservatives are under pressure from the opposition Labour Party to offer more generous support for consumers than Ms Truss has promised.
She is expected to announce her cabinet on Tuesday, with allies including Kwasi Kwarteng, James Cleverly and former leadership candidate Suella Braverman among those tipped for senior positions.
Ahead of an expected reshuffle, Priti Patel said she would be resigning as home secretary and returning to the backbenches after Ms Truss takes office.
“It is my choice to continue my public service to the country and the Witham constituency from the backbenches, once Liz formally assumes office and a new home secretary is appointed,” Ms Patel said.
Later on Monday, sources close to Culture Secretary Nadine Dorries, one of Mr Johnson’s fiercest backers, said she had also decided to return to the backbenches, and Cabinet Office Minister Nigel Adams, another Johnson loyalist, is also standing down.
Mr Kwarteng sought to reassure markets on Monday by saying Ms Truss's promised £30 billion ($34.5bn) in tax cuts were affordable and that the crisis would be tackled in a “fiscally responsible way”.
But David Davis, a former Brexit minister who backed Mr Sunak, said the new leader faces “the toughest in-tray of any incoming prime minister since the Second World War”.
Labour leader Sir Keir Starmer congratulated Ms Truss but said 12 years of Tory rule had brought “low wages, high prices and a Tory cost of living crisis … only Labour can deliver the fresh start our country needs”.
Ms Truss, a cabinet minister since 2014 under three prime ministers, pitched a free-market agenda to Tory members, which involved scrapping all remnants of European law.
Her other campaign promises include raising military spending to three per cent of GDP in the face of a more hostile Russia.
Although Ms Truss was the strong favourite, her margin of victory was the smallest in a Tory leadership race since the process was opened up to the party grassroots in 2001.
“I know that our beliefs resonate with the British people — our beliefs in freedom, in the ability to control your own life, in low taxes, in personal responsibility," she said.
“I know that's why people voted for us in such numbers in 2019. And as your party leader, I intend to deliver what we promised those voters right across our great country.”
Ms Truss will face questions from MPs for the first time on Wednesday after flying to the queen's country estate at Balmoral, Scotland, to be invited to form a government.
Mr Johnson, forced out after Tory MPs lost patience with the air of scandal and chaos around his government, is expected to make a farewell speech before leaving Downing Street early on Tuesday.
He leaves office after three years and 44 days but there is already speculation in political circles that a comeback could be on the cards if Ms Truss proves unequal to the challenge.