{"id":278078,"date":"2026-02-07T00:25:08","date_gmt":"2026-02-07T00:25:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/278078\/"},"modified":"2026-02-07T00:25:08","modified_gmt":"2026-02-07T00:25:08","slug":"starmer-camp-warns-leadership-challenge-risks-economic-chaos","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/278078\/","title":{"rendered":"Starmer camp warns leadership challenge risks economic chaos"},"content":{"rendered":"

Unlock the Editor\u2019s Digest for free<\/p>\n

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/p>\n

Sir Keir Starmer\u2019s allies have warned Labour MPs that an attempt to topple the prime minister would wreak havoc on the economy after days of turmoil that hit sterling and rattled investors fearful of a shift to the left.<\/p>\n

In a sign of their alarm at the threat to Starmer\u2019s leadership over his handling of the Lord Peter Mandelson scandal<\/a>, the prime minister\u2019s supporters invoked the risk of a Liz Truss-style surge in interest rates if he was pushed out of office.<\/p>\n

\u201cVolatile bond markets make leadership challenges extremely costly for the country; it would be totally irresponsible,\u201d said one close ally of Starmer, who expressed concern at the prospect of the party membership deciding the next prime minister.<\/p>\n

\u201cThe Labour leadership electorate have shown them perfectly capable of unpredictable and disastrous outcomes,\u201d the ally added. \u201cRemember they elected Jeremy Corbyn. So sensible MPs should be very careful what they wish for.\u201d<\/p>\n

Starmer has a dwindling number of supporters in the House of Commons, where around 81 MPs would need to back a rival candidate to trigger a leadership vote by party members and affiliates.<\/p>\n

Business figures and investors also warned that the leadership turmoil could derail a recent uptick in sentiment since November\u2019s Budget, which would be further endangered by a turn to the left under a new prime minister.<\/p>\n

Andy Higginson, chair of FTSE 100 retailer JD Sports, who signed a letter endorsing Labour<\/a> ahead of the election, said that despite business dissatisfaction with the Starmer-led government\u2019s stewardship of the economy, the \u201cbig fear\u201d was that the party moves to the left.\u00a0<\/p>\n

\u201cWe voted for their pro-business message, and the risk is this would be a shift to the left through the back door,\u201d he added.<\/p>\n

A measure of investor concern about future government borrowing hit an eight-year peak on Friday, amid fears that a new prime minister could herald an increase in debt issuance already running at more than \u00a3300bn a year. <\/p>\n

The metric, the spread between 10-year and two-year government borrowing costs, rose to its highest level since 2018.<\/p>\n

\u201cIf the UK saw new leadership that decides to go down the fiscal expansion path, then the gilt market would likely throw a wobbly, and sterling probably would too,\u201d said Mike Riddell, a bond fund manager at Fidelity International.<\/p>\n

Many Labour MPs believe Starmer, already one of the most unpopular prime ministers on record, has been fatally damaged<\/a> by his decision to appoint Mandelson as Britain\u2019s ambassador to the US last year and the subsequent fallout from the Epstein files.<\/p>\n

Rivals including Wes Streeting, health secretary, Angela Rayner, former deputy prime minister, and Ed Miliband, energy secretary, are waiting in the wings as restive MPs debate whether to launch a bid to bring Starmer down.<\/p>\n

\u201cThe UK economy benefits from the stability that a government with a large majority brings,\u201d the Starmer ally said. \u201cPutting that at risk would be madness.\u201d<\/p>\n

Sterling suffered its worst one-day fall against the dollar since September on Thursday, as anxiety grew over the stability of the government, before bouncing back on Friday to $1.36.<\/p>\n

\"Line<\/p>\n

Some said it was the fear of an alternative to Starmer that was feeding the anxiety in currency markets.<\/p>\n

\u201cI think it\u2019s a classic case of the devil you know,\u201d said Jonathan Mondillo, head of fixed income at Aberdeen Investments. \u201cWith a backdrop of heightened geopolitical risk and uncertain macro landscape, sometimes markets just want stability.\u201d<\/p>\n

Stephen Jones, chief investment officer at Aegon Asset Management, added: \u201cA new PM isn\u2019t going to work, we have tried this, with five in the past 10 years.\u201d<\/p>\n

Concerns over Britain\u2019s debt levels have helped to push the UK\u2019s borrowing costs to the highest level among G7 countries. <\/p>\n

Recommended<\/p>\n

\"Montage<\/a><\/p>\n

But a rally in gilts since last year\u2019s Budget, fuelled by growing expectations for Bank of England interest rate cuts, has pushed yields down closer to those of other big economies.<\/p>\n

If another Labour MP \u201cless committed to fiscal responsibility\u201d were to replace Starmer, the BoE would \u201cnot be able to lower the bank rate as far, and investors would demand a larger risk premium for holding government debt\u201d, said Holger Schmieding, chief economist at German bank Berenberg.<\/p>\n

The ally of the prime minister said: \u201cLabour MPs should recognise that government is not like opposition. It\u2019s hard. There are scandals, problems, mistakes, events out of your control that dominate the media for days. <\/p>\n

\u201cUltimately though you get judged on delivery of actual change over five years. Swipe right for a new prime minister is not a serious way of governing.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this…\n","protected":false},"author":2,"featured_media":278079,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,184,85,46],"class_list":{"0":"post-278078","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-il","11":"tag-israel"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/278078","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=278078"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/278078\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/278079"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=278078"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=278078"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=278078"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}