Rise in UK borrowing costs reverses after cabinet backs Starmer
UK borrowing costs dipped back on Monday after rising earlier in the day, as cabinet ministers voiced support for the embattled Keir Starmer.The yield, or interest rate, on UK benchmark bonds initially increased on Monday as traders reacted to Sunday’s resignation of the prime minister’s chief of staff, Morgan McSweeney, over the decision to appoint Peter Mandelson as ambassador to Washington.Yields rose further after the Downing Street communications director, Tim Allan, resigned on Monday morning, with long-term borrowing costs then hitting their highest level since November, as the Scottish Labour leader, Anas Sarwar, called on Starmer to stand down as prime minister.With the Conservative leader, Kemi Badenoch, saying Starmer’s position was “untenable” after the departure of McSweeney, and the Green party leader, Zack Polanski, agreeing he should resign, the City of London was weighing up the prime minister’s survival chances, and assessing the impact of likely replacements on the public finances and the economy.At one stage, the yield on 10-year UK government debt rose by as much as 7 basis points (0.
07 percentage points) to 4.597%, matching a two-and-a-half-month high set last week.The yield on 30-year bonds was eight basis points higher at 5.42%, the highest since 19 November 2025, a week before the autumn budget.But borrowing costs then reversed almost all their earlier rise, after several cabinet members including the deputy PM, David Lammy, the chancellor, Rachel Reeves, the energy secretary, Ed Miliband and the defence secretary, John Healey, expressed support for the prime minister.
Angela Rayner, the former deputy prime minister and potential replacement for Starmer, also backed Starmer.“I urge all my colleagues to come together, remember our values and put them into practice as a team.The Prime Minister has my full support in leading us to that end,” she posted on X.Yields rise when bond prices fall, and indicate the rates at which investors are willing to lend to the government.The pound dipped by up to half a euro cent against the euro to €1.
1460, the lowest in more than two weeks, but was a little higher against the US dollar at lunchtime.“Movement among government bonds and the currency suggests there is no panic on financial markets about the stability of the UK government,” said Russ Mould, the investment director at AJ Bell.The likely candidates to replace Starmer would be more left-leaning; this implies higher spending and less focus on hitting the UK’s fiscal rules, which would typically be negative for UK government bonds and sterling.Rayner could take a more tax-and-spend approach, while the Greater Manchester mayor, Andy Burnham, has said Britain should stop being “in hock” to the bond markets.Capital Economics, the City consultancy, believes gilt yields are likely to rise if Starmer or Reeves are replaced, while the pound would weaken.
“The most likely longer-lasting influence is a loosening in fiscal policy that leads to higher gilt yields than otherwise and a weaker pound than otherwise,” said Ruth Gregory, the deputy chief UK economist at Capital Economics.The pound rallied against the US dollar in January but has dipped so far this month.Neil Wilson, an investor strategist at Saxo UK, suggested sterling could face more pressure “should the prime minster cop more heat over his appointment of Peter Mandelson as Britain’s ambassador to the US”.UK government bonds could be vulnerable, too.“Over the weekend, Starmer’s chief of staff, Morgan McSweeney, resigned and took responsibility for advising the PM to appoint Mandelson.
Far from drawing a line under things, this seems to have sparked renewed calls for Starmer to do the same.“Gilts were steady enough Monday morning but if the bond vigilantes were to sniff the likelihood of a leadership change I’d expect gilts to sell off, with sterling also hit as a proxy for investor sentiment towards UK political uncertainty and instability,” Wilson warned.
Futile resignations and blatant revisionism to the fore as Starmer staggers on | John Crace
Not another one. On Sunday it was Morgan McSweeney, Keir Starmer’s chief of staff, who took one for the team by resigning over the Peter Mandelson appointment. On Monday, No 10’s head of communications, Tim Allan, did likewise without offering much by way of an explanation.Presumably it was another effort to delay the inevitable. “We need a futile gesture, chaps
Streeting wrote off his re-election chances in WhatsApp exchanges with Mandelson
Wes Streeting predicted he would be “toast” at the next general election, according to private WhatsApp messages exchanged with Peter Mandelson and published by the health secretary in an effort to draw a line under his relationship with the disgraced peer.In the messages, Streeting said the government lacked a growth strategy and questioned No 10’s communications operation – remarks that appeared to form part of an effort to position himself for a potential leadership contest.The prime minister’s grip on power was pushed to the brink on Monday after Anas Sarwar, Labour’s leader in Scotland, called for him to stand down before the May Scottish parliamentary elections, citing “too many mistakes” by the UK government.Streeting, regarded as a potential leadership contender should Starmer go, had a close friendship with Mandelson that, after the scandal that erupted last week, threatened to be a significant liability to his ambitions.Allies of the health secretary said the WhatsApp messages, sent between August 2024 and October last year, showed he had “nothing to hide” about their relationship
Peter Unwin obituary
My father, Peter Unwin, who has died aged 93, was a distinguished diplomat, author and commentator on foreign affairs. His main area of expertise was central Europe, and he was posted to Budapest twice, first as third secretary (1958-61) and then as ambassador (1983-86), hosting the visit of the then British prime minister, Margaret Thatcher, and encouraging the opening up to the west. In 1991, he wrote Voice in the Wilderness, his biography of Imre Nagy, the reformist Hungarian prime minister, who was executed for standing up to the Soviet Union.Throughout his life Peter championed the causes of democracy, international norms and the rule of law. His first job in the Foreign Service was in 1956 in the Levant department
Sarwar has shown his ruthless streak. But will his swipe at Starmer mean anything to voters?
Anas Sarwar has shown he has a ruthless streak. Once one of Keir Starmer’s staunchest cheerleaders and allies, the Scottish Labour leader is now the most senior party figure to call for him to quit.Despite anger among his colleagues and criticism that his decision to demand Starmer stands down was “idiotic, immature and self-defeating”, Sarwar’s political calculation is blunt and uncompromising.Sarwar and his advisers, having watched Scottish Labour’s polling figures plummet as the disarray inside the UK government deepened into chaos and then crisis, believe the risk of calling on Starmer to quit is justified.Sarwar, by delivering a better result in Scotland at the 2024 general election – winning 35
Scottish Labour leader Anas Sarwar calls on Keir Starmer to stand down
Anas Sarwar, the Scottish Labour leader, has called on Keir Starmer to stand down, throwing the prime minister’s leadership of the country into serious peril.At a hastily arranged press conference in Glasgow, the senior Labour politician said: “The distraction needs to end, and the leadership in Downing Street has to change.”Sarwar said there had been “too many mistakes” by No 10 since Starmer came to power and that while the prime minister was a “decent man” he was undermining Labour’s ability to win the Scottish parliament elections in May.The Scottish party leader is said to be furious that the UK government’s decisions have severely damaged support for Scottish Labour, with the SNP’s John Swinney now appearing to be on course to stay in Bute House.Recent opinion polls show Labour trailing in third place behind the Scottish National party and Reform
Planning ahead: the political leadership campaigns that launched too soon
As any political adviser worth their salt will attest, it’s never too soon to start privately preparing for your candidate’s future leadership bid.Yet going too early with registering that all-important website risks telegraphing one’s intentions even before the starting gun has fired.Whoever is behind the site bearing her name, Angela Rayner is now facing awkward questions after it emerged that an unfinished site apparently touting her for Labour’s top job had briefly appeared online. Rayner’s team has dismissed the discovery as a “false flag” operation, but it does not appear to have been deliberately shared or leaked to journalists or political figures.The appearance of a site under construction in these circumstances is rare – but there is a long history of URLs being registered
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