UK borrowing costs rise as Starmer speech fails to dispel investor ‘jitters’
The cost of government borrowing has crept higher as Keir Starmer’s crucial speech failed to dispel investor “jitters” in the bond markets over political instability combined with fears of rising inflation.The yield, effectively the interest rate, on the benchmark 10-year UK government bonds (known as gilts) rose eight basis points (or 0.08 of a percentage point) to 5% on Monday.The yield on 30-year gilts rose 9.3 basis points to 5.
67%, edging closer to the 28-year high of 5,78% last week when uncertainty about Starmer’s future as prime minister was intensifying,In his speech, Starmer said he would fight any leadership challenge and would not walk away from his responsibilities after Labour’s drubbing in local elections in England and parliamentary contests in Scotland and Wales last week,Borrowing costs fell on Friday as the results of the elections emerged with signs that Labour had not suffered as badly as first feared,Those falls, however, were more than erased by Monday’s rises.
Susannah Streeter, the chief investment strategist at Wealth Club, a non-advisory investment service, said the speech had not “done the trick of calming bond markets”.“There is still a sense of jitters playing out as concerns about political instability collide with inflationary fears prompted by the ongoing conflict in the Middle East,” she said.Bond yields move in the opposite direction to bond prices because investors want to pay less and get a bigger reward for the risk of holding them.Higher yields increase the cost of borrowing for the government and eat away at the headroom that the chancellor, Rachel Reeves, has built up against her fiscal rules.The chief UK economist at Deutsche Bank, Sanjay Raja, estimated last week that more than half of the £24bn margin for error Reeves created by raising taxes in last autumn’s budget may already have been wiped out by higher gilt yields and the prospect of weaker economic growth.
Reeves has sought to win back bond market investors’ confidence since Labour came to power after Liz Truss’s short-lived government alarmed markets in 2022 with huge unfunded tax cuts.Reeves has repeatedly pointed out that £1 in every £10 the public sector spends goes on debt interest and said she is intent on bringing that down.Investors, however, are becoming increasingly worried that the risk of rising inflation as a result of soaring energy prices linked to the Iran war, alongside in-fighting among Labour MPs over Starmer’s future, will lead to a downgrade in the UK’s creditworthiness.Part of the worry is that if Starmer is forced out of Downing Street, his possible replacements may seek to increase public spending and loosen the government’s fiscal rules.Two potential frontrunners to succeed him, Angela Rayner and Andy Burnham, have hinted that they would like to see higher public spending.
The deputy chief UK economist at Capital Economics, Ruth Gregory, said: “The UK’s already fragile fiscal position means that investors will be on edge for any signs of fiscal loosening.”Alongside political uncertainty, the gilt market is also being affected by international developments in the Iran war.Investors believe the UK is more exposed than many other developed countries to the threat of rising inflation from higher energy prices and this is being priced into the yield.Oil prices rose on Monday after Donald Trump condemned Iran’s response to US proposals to end the war as “totally unacceptable”.Gregory said: “Most of the recent rise in gilt yields is due to the jump in energy prices, rather than a potential change in prime minister.
“For the gilt market, the war in Iran matters more.If there’s a resolution, market interest rate expectations and gilt yields would probably fall regardless of domestic political developments.”
Seven people barred from coming to UK for far-right rally
Seven people hoping to attend a far-right rally in central London on Saturday have been blocked from entering the country by the home secretary, Shabana Mahmood.Keir Starmer, the prime minister, promised on Monday to block “far-right agitators” hoping to attend the Unite the Kingdom event on 16 May organised by Tommy Robinson, whose real name is Stephen Yaxley-Lennon.Joey Mannarino, a US-based commentator, and Valentina Gomez, a Maga influencer, had their authorisation to enter the UK withdrawn on the grounds that their presence “would not be conducive to the public good”. The identities of the other five banned people are not known.In a speech aimed at resetting his premiership, Starmer said he would ban extremists from coming to Britain to speak at the nationalist march on Saturday
Catherine West backs down from Starmer challenge but urges him to go by September
Catherine West, the Labour MP who announced a challenge to Keir Starmer’s leadership, has changed course to say she instead wants the prime minister to set a timetable of September for his departure.West, the MP for Hornsey and Friern Barnet and a former Foreign Office minister, announced on Saturday that she would seek to gather the 81 Labour MPs’ names needed to formally challenge Starmer, saying this was just a device to tempt others to stand and that she did not wish to take over.In a statement released after Starmer’s speech on Monday morning in which he said he would fight on despite terrible results for Labour in elections last week, West called for an orderly process for Starmer to depart. She said: “I have listened to the prime minister’s speech this morning. I welcome the renewed energy and ideas
What did Keir Starmer say in ‘last chance’ speech to save his premiership?
Keir Starmer’s speech and press conference on Monday morning was almost universally billed as his final chance to save his premiership. Was it enough? And what – if anything – did he actually offer?This is a line that could have appeared in any Starmer speech of the last 12 months, but this time a lot of Labour MPs would have wanted something new and substantial in policy terms to back it. And there was not.Yes, there was a lot of passion, and a lot of talk about fighting on. But the only policy offerings were either not new – a youth experience scheme as part of a reset with the EU – or already effectively the case, as with the announcement that British Steel will be nationalised
Starmer vows to prove doubters wrong as he tries to ward off leadership challenge
Keir Starmer has said he will prove his doubters wrong as he warned Labour was facing “very dangerous opponents” in a make-or-break speech, with leadership rivals on the brink of a challenge.Starmer said he would fight any leadership challenge and would not walk away from his responsibilities as prime minister.He promised he would seek a new deal with the EU including a sweeping youth mobility scheme, as well as nationalising British steel and promising a beefed-up youth guarantee of jobs and apprenticeships.But he warned his critics in the party they risked opening the door to Nigel Farage’s Reform UK party and said it was time to take a more robust approach to the right.“We are not just facing dangerous times, but dangerous opponents, very dangerous opponents,” he said, saying Labour was the last defence against the country heading down a “very dark path”
Starmer faces fight to survive as Streeting and Rayner eye leadership bids
Keir Starmer faces a fight for his political life in the next 24 hours as potential Labour leadership rivals, from Wes Streeting to Angela Rayner, begin positioning themselves for a contest.Starmer is hoping to save his job on Monday with a speech promising to “face up to the big challenges” for the country on growth, energy, defence and Europe.However, his prospects of staying in No 10 appeared to be fading on Sunday after about 40 Labour MPs called for him to set a date to step down, including many backers of the Greater Manchester mayor, Andy Burnham, who hope to pressure the prime minister into resigning.Leadership contenders were circling after a disastrous set of local election results in which the party lost support to Reform UK and the Greens. One ally of Streeting said: “Wes isn’t going to challenge Keir but he is preparing in case it all falls apart
Who are the main threats to Keir Starmer’s Labour leadership?
Keir Starmer has long been dogged by leadership rivals – despite only having won a huge majority two years ago. He insists there is no vacancy, and that he will fight on in No 10, seeking a second five-year term and a decade in the job. However, the various contenders to replace him have been organising for some time.Many others may consider throwing their hats into the ring if the contest opened up – from the home secretary, Shabana Mahmood, and the education secretary, Bridget Phillipson, to the foreign secretary, Yvette Cooper, and the armed forces minister, Al Carns. But here are Starmer’s main threats:Health secretaryThe health secretary is widely thought to be the most ready for a leadership contest, and the one who stands to gain from a competition right now – given Andy Burnham is not an MP and Angela Rayner still has an unresolved tax problem
UK government borrowing costs rise as Starmer ‘fails to reassure bond markets’ – business live
UK borrowing costs rise as Starmer speech fails to dispel investor ‘jitters’
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