Analysis: What’s Next after Starmer Resigns as UK Prime Minister

By Laurie Laird

LONDON (MaceNews) – UK Prime Minister Keir Starmer resigned as leader of the Labour Party early on Monday, bringing an end to his turbulent two-year spell as prime minister.

A visibly-emotional Starmer acknowledged that he’d lost the confidence of his Labour Party colleagues and pledged his full support to his successor.  He’ll remain in office while a new leader is selected, a process that could stretch into September. 

“The question my party is asking now is whether I am best placed to lead us into the next election,” he told assembled media outside the black door of Number 10 Downing Street.  “I have heard the answer of my parliamentary party to that question, and I accept the answer in good grace.”

Starmer’s announcement comes a day before the 10-year anniversary of the UK’s vote to leave the European Union, an event that has sparked unprecedented political instability.  Starmer’s successor — who will ascend to the premiership as leader of the nation’s largest political party — will be the seventh prime minister since that landmark vote.

The outgoing Labour leader dragged his party toward the political centre, securing a landslide parliamentary victory in July of 2024, but Starmer’s personal approval ratings never matched the scale of that triumph.  Numerous economic policy U-turns have rattled financial markets, while his appointment of Labour Party grandee Peter Mandelson as ambassador to the United States raised questions over his political judgement. Mandelson resigned that post after revelations of a close relationship with the convicted sex offender Jeffrey Epstein and is under criminal investigation over his conduct in office.

But the trigger for Monday’s announcement was the return to frontline politics of a high-profile regional official.  Andy Burnham — outgoing mayor of the nation’s second biggest urban area — has made no secret of his intention to challenge Starmer as leader of the party.  After winning a special election last week, Burnham took up his parliamentary seat on Monday afternoon.  That ballot was triggered by the resignation of Labour member Josh Simons, who stepped aside to give Burnham an opportunity to run for a national seat, fulfilling a requirement for party leadership.  Burnham won more than 50% of that local vote, roundly defeating a candidate from the far-right Reform party, which remains the most popular grouping in national polls.

Burnham has confirmed his intention to run for leadership, and claims to have gained the support of the 20% of Labour members of parliament needed to trigger a bid.  Other serving MP’s have until July 9th to enter the contest, which could play out over several months.  But would-be challenger Wes Streeting, a former health minister, immediately threw his weight behind Burnham, increasing the likelihood of Burnham running unopposed, potentially allowing him to move into 10 Downing Street before the summer recess begins in mid-July.

Investors have both publicly and privately expressed concerns that Burnham may be less committed to fiscal probity than the current government; he has recently disavowed dismissive comments over the importance of the bond markets.  But he has assembled a market-friendly team of informal financial advisors, including Andy Haldane, a former chief economist at the Bank of England, and Richard Hughes, a veteran of the Office for Budget Responsibility, the UK fiscal watchdog.  He has yet to give a steer on his choice for chancellor of the exchequer, the country’s top finance official, although Burnham allies told the Sunday Times that he is unlikely to retain the services of current chancellor Rachel Reeves.  A former Bank of England staffer, Reeves is largely respected by fixed-income investors, but disappointed business leaders by increasing the employers’ payroll tax in the autumn of 2024.

UK markets were remarkably stoic following this latest bout of political instability.  Sterling dipped modestly ahead of Starmer’s announcement, but stood 0.2% higher at $1.3255 by mid afternoon.  Gilt yields went the other way, falling by five to six basis points across the curve. Despite that benign reaction, UK borrowing costs remain significantly higher than those in other Group of Seven nations, with 10-year yields hovering near 4.79% at mid afternoon on Monday, compared with 4.50% in the U.S. and 2.95% in Germany.