On July 9, 2024, at Downing Street in London, UK Prime Minister Keir Starmer will host the first roundtable of local leaders with Greater Manchester Mayor Andy Burnham (Republican).
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 in the leadership race.
In the election in Makerfield, north-west England, Labour’s former mayor of Greater Manchester, Burnham, defeated the British Reform Party by more than 9,000 votes, winning nearly 55% of the vote.
Mr Burnham could pose a leadership challenge to Mr Starmer as early as next week if he is formally sworn in as an MP.
In his victory speech, Mr Burnham, a prominent figure on the party’s left and often referred to as Labour’s “King in the North”, described Makerfield as a “touchstone” rather than a “stepping stone” and pledged to put neglected communities at the heart of his politics.
In his victory acceptance speech, Burnham appeared to be on the cusp of becoming leader.
He said the victory was “a chance to build a new politics based on unity and hope” and “turn away from the path that leads to the kind of divided and dark politics we see in the United States”, adding: “We have to get this country back on the right path.”
UK fiscal discipline attracts attention
Peel Hunt chief economist Callum Pickering said Mr Burnham’s victory had been largely expected, but it raised some pressing questions for the market.
Importantly, markets will be watching whether Burnham’s government sticks to Labour’s existing fiscal rules and whether his policy agenda risks increasing inflationary pressures.
Mr Burnham sought to appease investors last month by denying previous comments suggesting the UK was being “swayed by the bond market”.
Mr Pickering said he did not expect Mr Burnham to signal a departure from the current framework for borrowing and debt, but warned investors could still demand additional cover for inflation risks on UK government bonds.
“We expect to see some inflation premium,” Pickering said on CNBC’s “Europe Early Edition” on Friday, noting the potential for pressure on both short-term and long-term Treasuries, known as Gilts.
UK government bond yields are trading at a premium compared to developed markets. This partly reflects the political instability of recent years.
The schedule of leadership challenges can also be important.
If Labor leaders conclude they no longer support Mr Starmer, an orderly transition could limit market turmoil. But Pickering said investors could be forced to wait for more clarity on tax, spending and borrowing measures if the battle between Starmer and Burnham drags on.
Mr Pickering said the bigger questions centered on who would serve as finance minister in Burnham’s cabinet and how that would ultimately shape economic policy.
“For me, the uncertainty is not what happens next at No. 10, but what happens next door at No. 11,” Mr Pickering said, referring to the traditional residence of the British Chancellor of the Exchequer.
