Health Secretary Wes Streeting is expected to resign on Thursday, formally launching a leadership challenge against Prime Minister Keir Starmer. The move follows a brief meeting between the two on Wednesday, which lasted less than 20 minutes. Streeting, seen as a continuity candidate, is likely to face opposition from left-leaning contenders like former deputy leader Angela Rayner and Greater Manchester Mayor Andy Burnham, who may struggle to secure a parliamentary seat in time to run.
Market Reactions and Political Fallout
Bond markets have reacted cautiously to the potential leadership contest, with yields on UK government bonds (gilts) fluctuating. Investors are concerned that a more left-leaning leader could increase public spending and borrowing, raising borrowing costs. The 10-year gilt yield stood at 5.040% on Thursday, while the 30-year gilt hovered around 5.759%.
Internal Party Divisions
Starmer has urged MPs to avoid a leadership contest, warning it would cause chaos and paralyze the government. However, supporters of Burnham are pushing to extend the timeline for a leadership election to allow him to find a parliamentary seat. Meanwhile, left-wing MPs are considering backing Rayner or even Ed Miliband if Burnham is unable to stand.
King’s Speech Amid Turmoil
The King’s Speech on Wednesday provided a brief respite from the infighting, outlining the government’s legislative agenda. However, the focus quickly returned to the leadership crisis, with reports suggesting Streeting’s resignation is imminent. Starmer has vowed to fight any challenge, but the growing number of MPs calling for his resignation—now over 80—could force a contest.
Chancellor’s Silence and Allegiances
Chancellor Rachel Reeves has remained notably silent amid the turmoil, fueling speculation that she may support Streeting’s bid. Reports suggest Reeves expects a key role in a potential Streeting-led government, possibly as Foreign Secretary. Her silence has been interpreted as a lack of loyalty to Starmer, who may have considered sacking her in a reshuffle.
Burnham’s Path to Leadership
Burnham’s supporters are lobbying Labour’s ruling body to ensure he can stand in a leadership election, even if he lacks a parliamentary seat. Speculation surrounds whether an MP, such as Afzal Khan, would resign to allow Burnham to run. If Burnham cannot secure a seat, Miliband could emerge as the left-wing candidate, despite his previous electoral losses.
Market and Political Implications
The leadership contest has raised concerns about political instability, with bond markets reacting to the uncertainty. A prolonged contest could delay key legislative priorities and further weaken Labour’s standing in the polls, where Reform UK has surged ahead. Starmer’s allies have warned that a challenge would distract from governing and risk further electoral setbacks.