Andy Burnham's change in tack on fiscal rules and bond markets is understandable

"However, investors also take a view that a leadership fight is bad for business, and that a Starmer replacement would probably add to borrowing. In a country contemplating its sixth prime minister in seven years, many investors are weary of political instability. Against this backdrop, Burnham's in hock comments and talk of a radical policy agenda involving the renationalisation of energy and water have set him at a disadvantage in the City."

Andy Burnham faces a narrow route to replace Keir Starmer as prime minister, involving a difficult byelection, an undeclared leadership contest, and an unfavorable bond market environment. His effort to reassure City investors has required careful messaging. After warning that Britain was too indebted to bond markets, he later indicated support for the government’s current fiscal rules and said he would have a plan to reduce debt. Fiscal rules limit borrowing and debt to reassure investors in the UK government debt market. UK borrowing costs have risen sharply due to higher inflation and expectations that the Middle East conflict will affect growth. Investors also view leadership fights as harmful to business and expect higher borrowing under a replacement. Burnham’s earlier “in hock” comments and talk of radical renationalisation policies have weakened his position with investors.

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