According to BNY’s Geoff Yu, Sir Keir Starmer has resigned as Prime Minister of the United Kingdom, with expectations that Andy Burnham will be appointed as the new Labour leader and Prime Minister without a contested leadership election, thereby avoiding internal party divisions [1]. This political transition marks the seventh prime minister in ten years for the UK [1].
The market reaction to Starmer’s resignation has been muted, as this outcome was largely anticipated by investors following the May local elections [1]. Gilt yields have already reflected expectations of a higher fiscal impulse under the new leadership [1]. However, BNY notes that a sustained improvement in the British Pound’s performance will depend on the return of cross-border investment flows, which have been subdued since the second half of 2025 [1]. The bank expresses doubt that these flows will recover until a new Chancellor is appointed [1].
Investors are watching for a credible and well-executed growth strategy from the incoming government. BNY suggests that if such a strategy is implemented, the likelihood of a repeat of the market turmoil seen in 2022 is low [1].
CONCLUSION
The resignation of Sir Keir Starmer and the expected appointment of Andy Burnham as Prime Minister have had little immediate impact on UK assets, as these developments were already priced in. Market participants are now focused on the appointment of a new Chancellor and the credibility of the government’s growth strategy for any significant movement in the British Pound.