Starmer to confirm autumn exit Monday as 100 lawmakers push change

UK Prime Minister Keir Starmer will confirm his autumn departure on Monday, The Guardian reported, removing the open-ended uncertainty that has weighed on sterling while introducing medium-term fiscal risk with Labour's Andy Burnham as the likely successor.

"The prime minister remains focused on getting on with the job of governing," a government source said, pushing back against the Observer's report that Starmer was discussing his exit with family at Chequers.

More than 100 Labour lawmakers — roughly a quarter of the party's representatives in the House of Commons — have publicly called for Starmer to resign or set a departure timetable. The pressure intensified Friday after Burnham, the mayor of Greater Manchester, won a parliamentary seat that enables him to launch a formal leadership challenge. Starmer said Friday he would fight any bid to oust him and urged the party to avoid internal conflict.

An orderly autumn transition would remove the acute uncertainty that has pressured sterling in recent months, as markets typically price a defined timeline over an open-ended leadership crisis. But the medium-term outlook stays clouded: Burnham's more left-leaning fiscal instincts relative to Starmer introduce a political risk premium into UK gilts and GBP/USD until his policy direction becomes clearer.

The pound has traded under pressure in recent weeks as the leadership crisis deepened, with GBP/USD slipping toward the 1.26 handle as concerns grew that a prolonged power struggle could delay fiscal decisions. A defined departure timetable may trigger a short-term relief rally in sterling, though analysts caution that the currency's trajectory hinges on the fiscal stance of Starmer's successor.

The last time a British prime minister was forced out mid-term — Boris Johnson's resignation in July 2022 followed by Liz Truss's disastrous mini-budget — gilt yields surged more than 100 basis points in a matter of weeks and GBP/USD plunged to an all-time low of 1.0350. While the current Labour leadership transition is unlikely to replicate that scale of turmoil given the party's broader fiscal discipline, the episode shows how quickly political risk can cascade through UK assets.

Burnham, who has positioned himself to the left of Starmer on fiscal policy, has yet to detail his economic platform. His victory in the Wigan by-election Friday gave him a Commons seat from which to mount a leadership bid, and Labour insiders expect a formal announcement within days of Starmer's departure confirmation. Markets will scrutinize his early statements for signals on spending, taxation, and the fiscal rules that have anchored UK debt markets under Starmer.

The Bank of England, which has kept its benchmark rate at 4.25 percent after cutting 25 basis points in May, faces an additional layer of uncertainty. A more expansionary fiscal stance under Burnham could complicate the BoE's inflation fight, potentially delaying further rate cuts and keeping gilt yields elevated.

This article is for informational purposes only and does not constitute investment advice.