His appointment has angered the Conservative Party and will likely add weight to its argument that the top level of the BBC is being filled with the Prime Minister's friends and supporters, otherwise known as "Tony's cronies", on the grounds that director general Greg Dyke is a former Labour Party donor.
The shadow culture secretary Tim Yeo has said that, while he has no problem with Gavyn Davies, the fact that the BBC director general and the chairman are both Labour supporters represents "a break with all previous precedents". This, he says, will make life difficult for the BBC itself.
"The only way for the BBC to salvage their reputation for political impartiality would be for them to appoint an identifiably Conservative vice-chairman," Yeo said.
The Liberal Democrats are taking a wait-and-see approach to the issue of political bias. Mark Oaten, chairman of the Liberal Democrat parliamentary party, said, "Gavyn Davies has made a significant contribution to broadcasting in recent years, but his known political sympathies do give rise to concern. We shall be monitoring his stewardship of the BBC very closely to be sure that he is upholding its traditions of impartiality."
The Tories, however, are most likely to get their way. The government is almost certain to announce the appointment of a Conservative supporter to the position of vice-chairman. Long tipped for the role is Baroness Hogg, who was the head of John Major's policy unit between 1992 and 1995.
It is a solution that Davies himself supports. Speaking at the press conference to announce his appointment at Broadcasting House on Wednesday, Davies said he hoped the vice-chairman would follow the tradition of previous appointments in that there would be a mixture of political affiliations in the three top jobs.
Davies has been a Labour party supporter since his teens and is married to the chancellor Gordon Brown's private secretary Sue Nye. These factors help fuel accusations that Davies' appointment will hinder the corporation's commitment to unbiased political reporting.
Despite aggressive opposition to his appointment from the Conservatives, Davies beat a shortlist of heavyweight candidates including broadcaster David Dimbleby, the former head of Channel 4 Michael Grade and former Labour leader of the House of Lords Baroness Jay.
It is understood that Davies was the only name put forward to culture secretary Tessa Jowell and Tony Blair to consider from the shortlist and it has also been reported that the Tories were not consulted at all.
Some have questioned why they should be, as previous BBC chairmen have all been Conservative supporters, including the out-going Sir Christopher.
Davies' closest rival is understood to have been David Dimbleby, but his lack of experience in administration is believed to have let him down. Some believed that he was also damaged by the controversial edition of Question Time following the terrorist attacks on New York and Washington where Islamic extremists launched a barrage of anti-American rhetoric. However, Sir Christopher said he believed that the decision had been made before the programme went out.
Davies began his career as an economist in 1974 when he abandoned a MPhil in economics at Oxford to take up a job in Downing Street advising Labour premiers Harold Wilson and James Callaghan. It was during his time at Downing Street that he met his future wife Sue Nye.
After five years in Downing Street and with an OBE under his belt, he left to work in the City. He joined Phillips & Drew, where he built a team of forecasters with colleague David Morrison, which is said to have revolutionised forecasting and analysing economics data.
Davies' judgment of the UK economy has been described by journalist and former Observer editor Will Hutton, who also worked at Phillips & Drew, as "pretty much the best in the world from the early Eighties".
Davies moved on to Simon & Coates, which was later taken over by the Chase Manhattan Bank. Davies, with Morrison, remained for a further five years before approaching a newcomer to the City, Goldman Sachs, in 1984 about establishing a global economics team.
Their idea was a success and Davies was elevated to the position of chief international economist and made a managing director at the company. It was at this time that he was asked by former Prime Minister John Major to sit on the then Treasury's "wise men" panel of economic forecasters.
It was at this time that Davies first began his relationship with the BBC when, because of his increasing prominence in the City, he made a series of appearances on BBC programmes as an economics commentator.
As a result of this, he was asked to chair the 1999 independent review into the BBC's future funding before being appointed deputy chairman to Sir Christopher last year.
Davies takes on the appointment with a glowing reputation and he is repeatedly described as honest, astute, fair and highly capable.
Sadly, whether he is up to the job has hardly been debated in the run-up to yesterday's announcement, because his achievements speak for themselves. Instead, his political background has completely overshadowed his ability.
If Davies lives up to half of his reputation and delivers what is expected of the BBC chairman, the question of politics should become less of an issue.
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