British Prime Minister Keir Starmer is expected to set out his timetable for departure on Monday, putting Britain on track for its seventh leader in 10 years, and paving the way for former Greater Manchester Mayor Andy Burnham to replace him.
Less than two years after Starmer won a landslide election victory promising to usher in a “decade of national renewal", senior sources from the UK’s ruling Labour Party said they believed the Prime Minister would announce his roadmap for leaving.
Just days ago, Starmer said he would not “walk away” from any leadership contest, after Andy Burnham won a by-election, smoothing the way for him to stand against Starmer.
But he is believed to have reconsidered over the weekend after four senior ministers, including allies, Home Secretary Shabana Mahmood and Foreign Secretary Yvette Cooper, told him to set a timetable for his departure.
Burnham’s victory in the Makerfield by-election on Friday, where he decisively beat right-wing populists Reform UK, has sparked hopes he can revive the fortunes of the Labour Party, which has been consistently trailing Nigel Farage’s party in the polls for more than a year.
Burnham earned a reputation for his good communication skills and willingness to advocate for communities in the north of England while Mayor of Greater Manchester, leading him to be nicknamed “King of the North,” by British media.
Labour has been battling to keep hold of its traditional supporters in the north of England, losing voters in towns to Reform UK and those in cities like Manchester and Sheffield to the Greens.
But Burnham faces an uphill battle if he replaces Starmer. He could find he has little room to manoeuvre, hemmed in by bond market investors opposed to any additional borrowing, and confronted by an angry electorate who believe the country is not working properly.
Britain already has the highest borrowing costs in the G7, due to its high debt and interest payments, years of anaemic economic growth, its struggles to cut spending and the need to invest in areas like defence.
Investors spoken to by Reuters were divided over whether Burnham, who said last September that Britain had to get "beyond this thing of being in hock to the bond markets" would respect the need to reassure markets. He has since said he was misrepresented.
"In our view, a Burnham premiership would inherit a precarious fiscal situation with few tools to deliver meaningful change," economists at Citibank said on Friday.
Former Health Minister Wes Streeting, who resigned from Starmer’s government in May, has said he has the backing of enough Labour MPs to enter the leadership race.
But one senior figure in the party said they believed Streeting could do a deal with Burnham, giving him a senior role if he stayed out of the contest.
Sterling fell by 0.2 per cent to $1.321 on Monday, as rumours mounted about Starmer's imminent exit announcement.
Burnham is viewed as being more left-leaning than Starmer and although he has said he will stick to incumbent Chancellor Rachel Reeves' tight fiscal rules, investors will need to see proof.
"The most important question relates to Burnham’s approach to fiscal policy, his pick of Chancellor and whether he will stick to the fiscal rules," Nomura Economist George Buckley said.
"Burnham has said that he would respect fiscal rules. However, it is not obvious where the money for any additional spending will come from. Taxes have reached a stage where further rise (s) ... would be counterproductive. Efficiency savings look good on paper, but never realistically work," Jefferies Strategist Mohit Kumar said.
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