A reported leadership rift at the heart of the UK government has left the pound holding its ground for now, but investors are starting to question how long that calm can last, warns the CEO of one of the world’s largest independent financial advisory organizations.
Health Secretary Wes Streeting has denied claims that he is positioning himself to replace Prime Minister Keir Starmer, but the speculation has reignited talk of internal tension at a politically delicate moment. It comes ahead of a critical Budget on 26 November, with unease growing over potential tax rises to fill a £30 billion fiscal gap.
Nigel Green of deVere Group says: “Markets are watching Westminster closely.
“Government leadership rumors surfacing before a crucial Budget reinforce the sense that the government is under strain.
“Investors aren’t yet pricing in political instability, but they’re alert to the risk that this story could return in the new year.”
He continues: “We believe there’s unlikely to be an immediate leadership challenge after the Budget — the priority will be getting through it cleanly, but this will be extremely tough after it looks like income tax rises are now almost inevitable.
“The greater risk in terms of a leadership threat comes in May, after the local elections.
“If Labour performs badly, the internal pressure will intensify, and at that point we would expect a full-on leadership contest.”
Nigel Green adds that the issue extends beyond Starmer personally.
“Prime Minister Starmer and [Finance Minsiter] Reeves are politically intertwined. Investors see them as one fiscal partnership, the team that restored a sense of economic discipline after years of turbulence. If one of them goes, both could fall, we believe. This scenario would unsettle markets instantly.”
