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U.K. Prime Minister Keir Starmer is anticipated to announce his resignation timetable on Monday, paving the way for former Greater Manchester Mayor Andy Burnham to become the likely next leader. Pressure has mounted on Starmer following a by-election loss and poor polling, with senior ministers urging his departure. Burnham’s ascension is expected to be unopposed, though economists warn he faces significant fiscal challenges and will need to reassure markets on his economic policy.
A seismic shift is underway in U.K. politics, as Prime Minister Keir Starmer is widely expected to announce a timetable for his departure on Monday. This move would initiate a process that could see the nation appoint its seventh leader in just a decade, underscoring a period of remarkable political volatility.
Leading the pack to succeed Starmer is Andy Burnham, the popular former Greater Manchester Mayor for Labour. Burnham's political stock soared last week following a convincing victory in a special by-election in north-west England, which paves his return to parliament and positions him as the frontrunner for the top job.
Initially, Starmer had vowed to resist any leadership challenge after a heavy defeat in recent local elections and sustained poor opinion polling eroded his authority within the ruling Labour Party. However, speculation about his imminent resignation intensified over the weekend as pressure mounted.
Reports indicate that a number of senior U.K. government ministers have reportedly urged the Prime Minister to outline an exit strategy. This includes prominent figures such as Foreign Secretary Yvette Cooper, Home Secretary Shabana Mahmood, and Energy Minister Ed Miliband, signaling a significant loss of internal party support.
VIDEO: UK Prime Minister Starmer reportedly on the cusp of quitting
Duration: 5:21 - Source: CNBC Europe Early Edition
Starmer's resignation would clear an unobstructed path for Burnham, who is slated to be sworn in as a Member of Parliament later today, to assume the leadership of the Labour Party and, consequently, the premiership. Burnham's decisive win in the Makerfield by-election has solidified his standing, making a direct leadership contest appear increasingly improbable and setting the stage for him to enter Downing Street unopposed.
Adding an unexpected international dimension, former U.S. President Donald Trump weighed in on the unfolding political drama. In a TruthSocial post on Sunday, Trump asserted that Starmer would resign, criticizing his performance on "IMMIGRATION AND ENERGY (OPEN NORTH SEA OIL!)".
Markets reacted to the political uncertainty, with the pound dipping 0.23% against the dollar, trading at $1.3202. Yields on 10-year U.K. government bonds (Gilts) remained flat early Monday at 4.8452%.
Burnham Faces Familiar Fiscal Headwinds
Lizzy Galbraith, a senior political economist at Aberdeen, commented on Burnham's potential premiership. While he currently benefits from his "outsider" status, offering voters a perceived alternative to Westminster establishment, Galbraith cautions that he will inherit the same daunting fiscal constraints that have often challenged the Starmer government's policy agenda.
VIDEO: Burnham's outsider appeal may fade once in office, says political economist
Duration: 3:33 - Source: CNBC Squawk Box Europe
Following Burnham's by-election triumph, U.K. gilt yields experienced a jump on Friday. However, Burnham has recently made efforts to reassure markets, stepping back from earlier remarks that suggested the U.K. was "in hock to the bond markets."
"In the short term, Burnham is actually going to be more focused on gaining the confidence of markets, and not moving too radically away from the current political agenda, certainly on fiscal policy, that has been set out under Keir Starmer and [Chancellor] Rachel Reeves," Galbraith explained to CNBC's "Squawk Box Europe" on Monday.
Chris Beauchamp, chief market analyst at IG, issued a warning that a "free-spending" approach from Burnham would be met with disapproval by markets, given the U.K.'s challenging financial situation. "For markets, the question is what will really change. Does Burnham, who already has form on flip-flopping, have the strength of will to chart a more dynamic course than the drift exhibited by Starmer's period in office?," Beauchamp questioned, highlighting the skepticism surrounding the potential new leader's economic direction.
