Mrs May has been seen as trying to draw a line under the David Cameron and Osborne era since taking over in Downing Street.
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But politicians and commentators say Lord O’Neill’s resignation could have a huge impact on Greater Manchester’s devolution journey – and could be final nail in the coffin for the Northern Powerhouse plan.
O’Neill, a former Goldman Sachs economist who is known for coining the term BRICs, first cited problems with Prime Minister Theresa May’s approach towards China over the summer.
In his resignation letter to May, O’Neill said the case for the project was even stronger after June’s decision by voters to leave the European Union, and he was pleased that “despite speculation to the contrary” it appeared to be “commanding your personal attention”. “I am leaving knowing that I can play some role supporting these critical initiatives as a non-governmental person”.
Lord O’Neill wrote a resignation letter that hinted strongly he did not trust her commitment to develop ties with China or maintain the Northern Powerhouse policy.
‘You have laid important foundations in these areas, and the Government will build on them, ‘ the PM wrote.
“You have made a significant contribution to driving forward the government’s work on delivering growth beyond the south-east through the northern powerhouse and on promoting stronger economic links with emerging economies, including China and India”.
Lord Jim O’Neill had played a major role in the development of former chancellor George Osborne’s plan to “rebalance” the economy of the north of England.
He had reportedly threatened to quit in July after May announced a review of whether to go ahead with the Hinkley Point nuclear plant, a key Chinese investment in Britain’s economy.
Mrs May sent him a brief letter wishing him well.
And the prime minister has been clear – this is a new chapter in Conservative politics.
Leeds West Labour MP Rachel Reeves described Lord O’Neill’s exit as “a crushing vote of no confidence” in Mrs May and her economic policies and it came on a day when extra pressure was heaped upon the PM by Yorkshire entrepreneur and Ukip donor Paul Sykes.
The Financial Times is also reporting that Lord O’Neill is unhappy with the return of grammar schools, one of the new Prime Minister’s flagship policies.
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One of Greater Manchester’s top Lib Dems, Stockport councillor Iain Roberts, said: “It’s hard to underestimate just how much opposition there is in parts of government to devolution and the Northern Powerhouse project”.
