Key insights
- Andy Burnham, a potential UK PM candidate, stated he would adhere to current fiscal rules, causing the pound to rise and gilt yields to fall. While this stabilizes the UK market, the impact on US equities is slightly negative due to potential global economic uncertainty and reduced risk appetite stemming from UK political instability.
Investing.com -- Andy Burnham, the leading candidate to replace Keir Starmer as UK prime minister, said he would not alter the government’s borrowing limits if he takes power.
A spokesperson for the Greater Manchester mayor told Bloomberg on Monday that Burnham would maintain current Chancellor of the Exchequer Rachel Reeves’ fiscal rules if he enters 10 Downing St. following a leadership election later this year. The spokesperson also said defense spending would not be exempted from the constraints.
The pound rose 0.7% against the dollar to $1.3415 following the statement, recovering some of last week’s losses, which were the largest since 2024. Gilts rallied, pushing the UK 30-year yield down seven basis points to 5.78%.
The statement addressed questions about Burnham’s fiscal policy approach if he were to succeed Starmer. More than one-fifth of the governing Labour Party’s members of Parliament have called on the prime minister to resign after poor local election results earlier this month, with many supporting Burnham or another replacement from the party’s left.
Burnham had previously suggested exempting defense spending from the fiscal rules in a Bloomberg interview last month during discussions about Europe building a stronger sovereign military deterrent.
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