UK Gilt Yields Spike As Burnham Win Opens Door To Oust Starmer

The odds of embattled UK Prime Minister Keir Starmer being ousted by the end of July are soaring this morning…

…after Greater Manchester Mayor Andy Burnham won a decisive victory for the ruling Labour Party that delivers him a seat in Parliament and, with it, a pathway to challenge Starmer for his job.

Burnham was elected in a standalone contest for the constituency of Makerfield, in northwestern England, with a convincing 54.8% of the vote. He defeated Robert Kenyon from Nigel Farage’s right-wing Reform UK, who secured 34.5%, while third-placed Restore Britain registered just under 7%.

In a post on X, Starmer congratulated his rival on his victory.

“Voters chose Labour’s campaign of hope and optimism over division and hate,” he wrote.

Farage said he was “disappointed,” in a video posted after the result.

Addressing voters who left his party for Restore he asked:

“What do you want? We are the challenger party to the left in this country, and I would urge you to think again.”

A defiant Starmer said in response that he would run against Burnham in any leadership contest.

“If there is one, I’ll stand,” he told broadcasters on Friday morning, hours after Burnham’s victory:

“I’m not going to walk away.”

As Bloomberg reports, the prime minister’s fortunes have faded after he led his party to a dismal showing in the May locals, where Reform gained ground. In the aftermath, almost a quarter of Labour’s more-than 400 MPs called on Starmer to go.

“Tonight could, just could, be the turning point,” Burnham said after the results were announced to loud cheers from his supporters.

“I do say to my own party, this is a final chance to change.”

“We must hear it, we must act upon it, and we must get it right,” he said.

“There will be no second chance.”

Despite, Burnham’s ruling out changing the government’s limits on borrowing if he were to gain power, in a bid to reassure investors about his fiscal plans, his win pushed Cable slightly lower and gilt yields notably higher:

 “With Burnham having made a statement win, the next few months will likely see domestic political risks dominating headlines in the UK and as a result markets pricing in real political risk premium,” said Megum Muhic, a strategist at RBC.

Burnham has the best (least worst) ratings of any major UK politician…

“The prime minister is now in political quicksand,” James Lyons, Starmer’s former director of communications, told Sky News.

“There is now a very good chance that Andy Burnham will be installed as prime minister without a contest,” he said, adding that the size of the win makes that more likely.

If Starmer steps down or is voted out by the Labour Party membership, the UK would usher in its fifth prime minister in less than four years.

What happens next? Here is a concise breakdown of key events from The Times political editor Steven Swinford.

• Cabinet ministers will this afternoon tell Sir Keir Starmer to set out a timeline for his departure in the wake of Andy Burnham’s by-election victory in Makerfield
• The prime minister is holding a series of meetings and calls with ministers and Labour MPs. The Times has been told that ‘multiple’ cabinet ministers will tell him that his “time is up”. Senior figures in No 10 are also telling Starmer it is time to go
• Starmer insists he is going nowhere. He is planning to use the calls to make the case for his Premiership and try to shore up support
• His pitch is twofold: 1) A contest will tear the party apart and 2) We are delivering – NHS waiting lists are falling, the number of small boat crossings is down, legal migration if falling. ‘The worst thing we can do is take our foot off the gas’
• Cabinet ministers say there is no route through this. It’s about accepting political reality and leaving with dignity
• We’re now locked in a debilitating stalemate. Neither Andy Burnham nor Keir Starmer wants a leadership contest, for very different reasons – Burnham because he favours a coronation, Starmer because he wants to stay in power and believes a challenge will rip the party apart
• Starmer is insisting he will fight any challenge. Allies say he has a £100,000 war-chest and all the infrastructure -including key staffers, campaign literature etc – in place. He is ready to go
• Burnham allies think Number 10 has lost contact with reality. They argue that on any measure it is over for Starmer and that he should accept reality and stand down. They accuse him on to power and say his position is untenable
• It looks increasingly like Burnham and Starmer may not talk until next week. As per @PronouncedAlva
• Burnham has his list of nominations ready to go – 200+ – and is prepared to hand them over to Starmer to pressure him into going
• The situation is clearly unsustainable. So how will the deadlock be broken? First, pressure from backbenchers – 100 Labour MPs have now called for him to go. That number will only rise this weekend
• Second, pressure from Cabinet ministers as above. But here’s the rub – we have been here before and he has just ignored them. Shabana Mahmood, Ed Miliband, John Healey, Wes Streeting… the list is getting longer and longer. We are somewhere between a rock and a hard place.