UK’s Starmer is facing a leadership challenge as his rival Burnham becomes an MP
British Prime Minister Sir Keir Starmer hosts the first round table of English regional mayors with Andy Burnham (R) Mayor of Greater Manchester, at Downing Street on July 9, 2024 in London, England.
Ian Vogler | WPA Pool | Getty Images
Andy Burnham has won a special election to the British Parliament, paving the way for him to challenge Prime Minister Keir Starmer for the party leadership.
Burnham, the former Labor mayor of Greater Manchester, defeated the Reform UK party by more than 9,000 votes, taking almost 55% of the vote, in the Makerfield election, in north-west England.
Burnham can now mount a leadership challenge to Starmer as soon as next week, when he is officially sworn in as an MP.
A figure on the left of the party often referred to as Labour’s King in the North, Burnham in his victory speech said Makerfield was “not a stepping stone” but a “touchstone”, promising to put marginalized communities at the heart of his politics.
In his acceptance speech, Burnham appeared to be laying the groundwork for a leadership bid.
He said that the victory provides “an opportunity to build a new politics, based on unity and hope”, and the opportunity to turn “from the path that leads us to the divided, dark politics of this kind that we see in the United States,” adding that “we must return the country to the right path.”
UK financial discipline in a virtual environment
Although Burnham’s victory was widely expected, the win raises several immediate questions for markets, said Kallum Pickering, chief economist at Peel Hunt.
Most importantly, markets will be looking at whether the Burnham government will stick to existing Labor fiscal policies and whether its policy risks adding to inflationary pressures.
Burnham last month moved to appeal to investors, returning to earlier comments where he suggested the UK was “in trouble in the bond markets.”
Pickering said he did not expect Burnham to signal a break with the current borrowing and lending framework – but warned that investors could still seek additional compensation for inflation risk in UK government bonds.
“I expect to see an inflation premium,” Pickering told CNBC’s “Europe Early Edition” on Friday, pointing to potential pressure on both short-term and long-term government bonds, known as Gilts.
UK government bond yields trade at premiums to developed market peers. This partially reflects the political instability of recent years.
The timeline for any leadership challenge can also be critical.
An orderly transition could limit market disruption if senior Labor figures conclude that Starmer no longer commands support. But Pickering said the protracted contest between Starmer and Burnham could leave investors waiting for more clarity on tax, spending and borrowing mechanisms.
Pickering said the big question is who will serve as finance minister in Burnham’s cabinet and how that will shape economic policy.
“The uncertainty for me is not over what’s going to happen next at No. 10, it’s what’s happening next door at No. 11,” Pickering said, referring to the traditional residence of the British chancellor of the exchequer.
