The UK’s long-term borrowing rates recently surged to their highest point since May 1998, driven by concerns over potential shifts in Labour’s leadership. On Tuesday morning, the interest rate on 30-year government bonds climbed by 11 basis points, reaching 5.794%. This rise was largely attributed to investor anxiety about possible changes in Labour’s tax and spending strategies under new leadership.
The market tension eased somewhat later in the day following assurances from Prime Minister Keir Starmer that he had no intention of resigning, and that no leadership challenge process had been initiated. His comments came during a cabinet meeting, which took place against the backdrop of the recent resignation of Miatta Fahnbulleh, the first minister to step down after Labour’s significant losses in local and devolved elections last week. Fahnbulleh had called for Starmer’s resignation, adding to the political pressures.
Starmer addressed these concerns by emphasizing that the Labour party has an established process for leadership challenges, which had not been activated, and reaffirmed his commitment to governance. “The country expects us to get on with governing. That is what I am doing and what we must do as a cabinet,” he stated. His remarks sought to stabilize the situation, aiming to calm both political and financial uncertainties.
Following the cabinet meeting, several senior ministers, including Business Secretary Peter Kyle, Technology Secretary Liz Kendall, and Housing Secretary Steve Reed, publicly expressed their support for Starmer. Their backing helped to alleviate some of the market’s concerns, leading to a slight retreat in bond yields. The yield on 10-year UK government bonds dipped below 5.1% after having reached 5.13% earlier, and the 30-year bond yield decreased to 5.76%, down from the new 28-year high of 5.81% it had hit earlier in the day.