British Prime Minister Keir Starmer attends the 80th anniversary of VJ Day at the National Memorial Arboretum in Alrewa, Staffordshire, on August 15, 2025.
Anthony Devlin | Getty Images Entertainment | Getty Images
British Prime Minister Keir Starmer appears increasingly vulnerable this week amid mounting speculation that he could face a leadership challenge after the autumn budget in late November.
Economists predict that Chancellor Rachel Reeves, Mr Starmer’s right-hand man, will be forced to break Labour’s manifesto pledge not to raise taxes on workers when she sets out her financial plans in the Budget on November 26.
Mr Reeves finds himself in an unenviable position as he tries to plug the fiscal black hole created by Labour’s spending pledges, a U-turn to reform spending cuts and his own rules on borrowing limits.
The tax increase for Labor is likely to upset not only voters who have expressed dismay with Starmer’s leadership since Labor’s landslide victory in the July 2024 general election, but also prominent members of the prime minister’s top cabinet team.
The BBC reported on Wednesday that a number of celebrities and allies of Starmer had been named as potential candidates to replace the Prime Minister in the event of a leadership challenge, including Health Secretary Wes Streeting and Home Secretary Shabana Mahmood.
Other names reported by the BBC include backbenchers including Energy Secretary Ed Miliband and former Transport Secretary Louise Hague.
Is there a rebellion?
Wes Streeting, who is seen as the leading candidate for a potential challenge to Starmer’s leadership, denies there is a conspiracy afoot and told Sky News on Wednesday he had no intention of trying to oust the prime minister. Instead, the prime minister’s allies condemned the briefing he gave him, calling it a “self-defeating and self-destructive move”.
UK Health Secretary Wes Streeting speaks at an event to launch NHS Day of Action in Runcorn, UK, on 28 March 2025.
Cameron Smith | Getty Images News | Getty Images
Asked on Sky’s Ridge and Frost Morning if he would embark on a leadership challenge after the budget was passed, Mr Streeting said “no” and said an overnight briefing on the issue was “completely self-defeating…especially because it’s not true”.
Mr Street said that although he had not supported Mr Starmer’s initial bid to become Labor leader, he had supported the Prime Minister “from the moment he was elected”.
Either way, the narrative around a potential leadership challenge is detrimental to the prime minister, who has been co-opted by US President Donald Trump and EU leaders and is seen as having performed well on the world stage, including signing trade deals with the US, India and the EU last year, but has performed poorly with voters at home.
Public dissatisfaction with illegal immigration, the economy and the criminal justice system has increased in recent months following several recent mistaken prisoner releases, and support for the right-wing Reform Party has grown, posing a major threat when local elections are held in May. The next general election is not scheduled to be held until 2029.
Just 21% of Britons have a favorable opinion of the Prime Minister, while 72% have an unfavorable view of him, according to an October YouGov poll. As a result, Mr Starmer’s favorability rating ended up at -51, the lowest ever recorded by YouGov, the pollster said.
Left wing shift?
Analysts say the risks to Mr Starmer’s leadership are “likely to be noise for now” and expect him to remain in the role for some time to come. Nevertheless, with the Budget and next May’s local elections, the next big litmus test of public opinion and a potentially decisive crossroads, Mr Starmer’s critics are growing more confident and likely to smell blood.
“Mr Starmer faces the worst polls in modern Prime Minister history and there is no smoke without fire,” Jordan Rochester, head of FICC strategy EMEA at Mizuho Bank, said in an email comment on Wednesday.
“If the budget is passed without any major upheaval, the idea of a leadership change will be brought up in May’s local elections, where opinion polls predict Labor will lose a landslide. This is a moment that could lead to a leadership change,” he added.
Rochester said there are two scenarios for what this could mean for markets: “We continue to lean toward the ‘centrists’ being the ultimate winners, but if that happens, markets will need to price in the risk of a hard left shift.”
market watching
Markets took note of Wednesday’s report, with yields on British bonds (known as gilts) rising slightly across the maturity curve on Tuesday.
By 10:10 a.m. in London, the benchmark 10-year Treasury yield rose 3 basis points (bp) to trade at 4.419%. Bond yields and prices move in opposite directions, so if investors are reluctant to lend to the government, bond prices will fall and yields will rise.
The UK government currently has the highest borrowing costs of any G7 country, with 30-year government bond yields well above the key benchmark of 5%.
British Prime Minister Keir Starmer and his wife Victoria Starmer serve tea and cake at Downing Street in London, England, on May 5, 2025.
Peter Nichols Getty Images News | Getty Images
Meanwhile, the British pound fell 0.27% against the US dollar to trade at $1.311, and fell 0.1% against the euro.
“The market is keeping a close eye on Westminster,” DeVere Group’s Nigel Green said on Wednesday.
“Rumors about the government’s leadership have surfaced ahead of a key budget, increasing the sense that the government is under stress. Investors have not yet priced in political instability, but are wary of the risk of this story repeating itself in the new year,” he added.
“We think it is unlikely that there will be any immediate leadership issues after the budget. The priority will be to pass the budget cleanly, which will be very tough as income tax hikes have become almost inevitable.”
—CNBC’s Chloe Taylor contributed reporting to this story.
