London, United Kingdom. Britain’s borrowing costs surged on Friday as Labour Party leadership uncertainty intensified after Greater Manchester Mayor Andy Burnham secured a possible path to challenge Prime Minister Keir Starmer. The developments unsettled investors and deepened a leadership crisis.
Leadership tensions within Labour
Starmer has faced pressure after a tumultuous week in which a main rival in government quit, accusing him of a lack of vision, while others positioned themselves for potential challenges to his leadership.
After the drama of recent days, any challenge could take longer to materialise. Starmer indicated he would fight to stay in power but would not block Burnham from seeking the seat in parliament required to launch a leadership bid.
Wes Streeting, who quit as health minister on Thursday and is expected to run against Starmer if a formal contest begins, indicated he is willing to wait and see whether Burnham can get to parliament. That process could take weeks, potentially paralysing the government as it confronts economic fallout from the wars in Iran and Ukraine and prolonging Britain’s near 10-year bout of political instability sparked by its vote to leave the European Union.
Calls for party unity
A British minister loyal to Starmer urged Labour Party colleagues to prioritise the country over internal party politics.
“I think this weekend everyone needs to just take a breath,” housing minister Steve Reed told the BBC. “We’ve had a dreadful week. We’ve looked appalling to the country in the way that we’ve behaved.”
He said he would tell colleagues: “Get on and do the jobs we were sent here to do.”
Market reaction
The potential return of Burnham to Westminster alarmed investors on Friday. Sterling, down around 2% against the dollar this week, was set for its worst week since late 2024, while UK long-term borrowing costs hit their highest in almost two decades and UK bank stocks tumbled.
How do you think the Labour Party’s leadership uncertainty could affect the UK economy in the coming weeks?