Markets underpricing potential Burnham win over Starmer, analysts say
Mayor of Greater Manchester Andy Burnham.
Leon Neal | Getty Images News | Getty Images
Andy Burnham, the frontrunner to overthrow U.K. Prime Minister Keir Starmer, abruptly cancelled a call aimed at placating investors nervous about his potential policy mix on Monday, the FT reported.
Burnham — who is not yet a sitting member of the U.K. parliament — will run in the June 18 by-election in Makerfield, north-west England. If he wins the seat, he is widely expected to launch a formal challenge to usurp Starmer’s position.
Starmer’s premiership has been under intense pressure following a crushing defeat for the ruling Labour Party in the U.K.’s local elections.
Political instability and Burnham’s bid to return to Westminster has sent jitters through the U.K.’s government bond market in recent weeks, amid expectations that he would be a tack to the left from Starmer and ramp up borrowing.
The U.K. has the highest borrowing costs in the G7, with yields on its long-term gilts trading well above the critical 5% threshold.
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Burnham, who last week wrote an op-ed calling for the nationalization of key industries and strong regulatory control over Big Tech and AI, has said in the past that politicians should not be “in hock to the bond markets” — comments he recently rowed back from.
According to the FT, Burnham was scheduled to participate in a call hosted by political advisory Signum Global Advisors to discuss various talking points, including “balancing fiscal policy change with bond market pressure.”
Sources told the publication that the call was postponed shortly before it was slated to begin, with participants told it could not be held due to a scheduling conflict.
CNBC contacted Signum Global and Burnham’s office for comment.
Markets underestimating U.K. political risk
In an analysis published Wednesday, financial services firm Ebury said markets were underestimating the consequences of the Makerfield by-election and ongoing political risk.
Ebury’s base care, according to the firm’s head of market strategy Matthew Ryan, is that Starmer’s tenure ends in the near term through a formal leadership challenge.
Ryan labeled the market risk posed by a Burnham victory as “very high.”
“A Burnham victory would, in our view, represent the most significant leftward shift among the realistic succession scenarios, and we would expect markets to reprice U.K. fiscal risk accordingly and quickly,” he said.
“His tenure as mayor perhaps offers a glimpse into his plans on a national level, i.e. a material loosening in spending, funded by borrowing and further taxation on capital and higher earners. The problem is that the U.K. can ill afford such an experiment given the wafer-thin…
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