Markets have viewed Andy Burnham’s potential arrival in Downing Street with caution as they see Labour under his control resorting to higher public spending and therefore more borrowing.
Mr Burnham comfortably won the Makerfield by-election on Thursday putting the political establishment and financial markets on alert for the next move from Downing Street.
The Prime Minster Sir Keir Starmer has stated publicly that he will fight any contest, but there was growing pressure on him today from within his own party to set out a timetable for stepping down.
In the meantime, UK borrowing costs and the pound rose on Friday The yield on the benchmark ten-year UK government bond climbed by as much as 0.07 percentage points to 4.843% as investors anticipate a rise in borrowing. Sterling was up by 0.2% against the dollar at $1.32.
Mr Burnham is viewed as being on the left wing of the Labour Party and has signalled that he would compensate the Waspi campaigners and attempt to take the English and Welsh water companies into public ownership.
His previous comment that the UK should not to be “in hock” to the bond market spooked investors, but he is known to have taken advice on dealing with the City to avoid prompting a backlash from the financial markets.
While attention is focused on the future of the Prime Minister, there is also speculation over who Mr Burnham would choose as chancellor to replace Rachel Reeves whose days also appear numbered.
Ed Miliband, Angela Rayner and Wes Streeting are all viewed as possible candidates.
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