\n Andy Burnham’s arrival at Downing Street has not unsettled the UK markets. Investors are now waiting to see whether his social and industrial ambitions will remain compatible with the budget discipline he has promised.\n <\/p>\n
On Monday Andy Burnham became the UK’s seventh prime minister in 10 years, succeeding Keir Starmer, without an early general election. The former mayor of Greater Manchester inherits an economy grappling with weak growth, inflation that is still near 3% and a persistent cost-of-living crisis. His agenda aims to tackle this stagnation with more decentralization, more investment in social housing and greater support for public services, while reforming how care is funded for older and disabled people who have lost their independence.<\/p>\n
Despite this more interventionist tilt, Burnham’s arrival has triggered only a limited reaction in sterling and UK bonds. Sterling has slipped against the dollar over the past few days, but has strengthened sharply against the euro since the start of July, while the spread between the 10-year UK gilt yield and the German Bund remains steady at around 185 basis points. The prime minister has pledged to stick to existing rules and not to raise the three main levies on workers: income tax, national insurance contributions and VAT.<\/p>\n
According to ING, the central scenario remains a relatively measured autumn budget, combining some additional spending, targeted tax increases and moderate borrowing. Burnham would have around \u00a316bn of additional headroom thanks to changes made to the fiscal framework under Rachel Reeves, the former chancellor of the exchequer in Starmer’s government. Above all, gilt issuance is expected to fall to GBP246bn in the current fiscal year, from \u00a3304bn previously, which should help limit strains from bond supply.<\/p>\n
The main risk, however, lies in the gap between these constraints and the government’s ambitions. A sweeping social housing program, the creation of public regional banks or excluding certain investment spending from the fiscal rules would increase financing needs. Gilts would then be the first assets punished, with a risk of a further rise in yields and renewed pressure on sterling.<\/p>\n
Over the longer term, decentralization could lift productivity and spur investment beyond London. Barclays even argues that UK fundamentals may be better than the prevailing gloom suggests. The upside potential for UK equities, particularly in construction and infrastructure, will nonetheless depend on Burnham’s ability to fund his economic pivot without sustainably reigniting the fiscal risk premium.<\/p>\n","protected":false},"excerpt":{"rendered":"Andy Burnham’s arrival at Downing Street has not unsettled the UK markets. Investors are now waiting to see…\n","protected":false},"author":2,"featured_media":703055,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[59,57,58,467,50,56,54,55],"class_list":["post-703054","post","type-post","status-publish","format-standard","has-post-thumbnail","category-united-kingdom","tag-gb","tag-great-britain","tag-greatbritain","tag-markets","tag-news","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/703054","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=703054"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/703054\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/703055"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=703054"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=703054"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=703054"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}