“Warning shot” as markets react to Prime Minister Keir Starmer’s resignation

“I want to thank all of those friends and colleagues who have been at my side for these past six years or so, for their incredible commitment, service, and support.”

He added: “I want to thank the brilliant Number 10 staff and our country’s extraordinary civil service who dedicate their lives to public service.

“When I leave the biggest job in the country, I shall spend more time on the most important job, being the best husband I can to my fantastic wife, who has been a rock by my side through good times and bad, and being the best dad I can to my beautiful children, who are my pride and my joy. Thank you very much.”

In the wake of the announcement, Nigel Green, CEO of deVere Group, warned that sterling weakened against the dollar and gilt yields remained elevated, “after months of political uncertainty and concerns about the UK’s fiscal outlook.”

He said: “The market’s first question isn’t who replaces Keir Starmer. It’s whether the next Prime Minister pushes Britain further towards taxing wealth and capital.

“If investors conclude the answer is yes, sterling falls, gilt yields rise and money leaves. It’s that simple.”

Andy Burnham’s recent victory in Makerfield has been seen as a step toward his taking over as Labour leader.

In a post on X, Burnham said: “Keir has given a huge service to our country, and I want to thank him for his leadership and dedication during such a challenging period.

“His decision marks the beginning of a period of transition.”

Green said investors would be paying attention to Burnham’s rising political profile, while Starmer’s departure throws fresh uncertainty around the future of Chancellor Rachel Reeves’ future.

He said: “If she exits too, markets lose the two figures most closely associated with fiscal restraint inside this government. Investors will not shrug that off.”

Green added: “The market reaction so far is a warning shot. Sterling is weaker and gilt yields are elevated. Investors are asking what comes after Starmer.

“If Andy Burnham emerges as the frontrunner and markets become convinced Britain is heading towards wealth taxes and a more interventionist economic agenda, the pressure on the pound and gilts is likely to intensify.

“Politics is now becoming a market driver in Britain again. Investors will be watching Labour’s leadership contest very closely because the outcome could have real consequences for UK assets, borrowing costs and capital flows.”

REACTION:

Andrew Lloyd, managing director at Search Acumen: 

“The biggest risk from any leadership upheaval isn’t politics itself, it’s the uncertainty that follows. 

“We’ve seen an immediate drop in the value of the pound against the dollar, with markets already reacting to possible changes in fiscal policy. 

“Housebuilders, investors and lenders can adapt to almost any policy framework, but they can’t invest confidently if they don’t know whether that framework will still exist in six months’ time. 

“Andy Burnham has shown that smart intervention can unlock growth. Manchester’s record-breaking city-centre regeneration proves what can be achieved when Government works in partnership with the private sector. 

“If Andy can’t help fix Britain’s housing crisis, it’s difficult to see who can. But the 1.5 million homes pledge was always a unicorn, and as the clock ticks, it still looks more like a headline than a housing pipeline. 

“The good news is that we’re finally seeing signs of real delivery. The move towards AI-assisted planning and digital infrastructure points to a government that understands that growth requires modernisation. 

“Technology isn’t a silver bullet, but a faster, more predictable planning system is exactly the kind of reform housebuilders and investors have been calling for. 

“The danger now is that political drift stalls momentum just as the foundations for growth are being laid. Investors don’t need another reset; they need delivery. 

“The next Prime Minister must focus relentlessly on execution, doubling down on the built environment investment needed to unlock private capital. 

“The UK’s growth story will ultimately be judged not by political headlines, but by whether we can build more homes, attract more investment and create the conditions for businesses to scale. The next few months will determine whether confidence grows or fades.”

Scott Dawson, CEO of DECTA: 

“The resignation of Kier Starmer underlines what the UK’s business community has been saying for some time – the country needs stability, and a major part of that comes from having a steady hand at the rudder. 

“We don’t have that and the world knows it – six Prime Ministers, soon to be seven, in the past ten years doesn’t show the kind of stability that overseas investors need. 

“That perception filters down into a general view that the UK is a basket case in general. 

“Despite what the facts might say, there are a lot of otherwise intelligent people who believe that the country is crime-ridden, prone to political unrest and poorly managed. Only the latter is true in part.

“One of the main challenges for the next Prime Minister – seemingly Andy Burnham – will be to reverse this perception, not just for their own electorate but for the world at large. 

“This means serving out the full length of their term, which in turn means avoiding the rank unpopularity that dogged Starmer’s prime ministership by, more than anything, putting more money in people’s pockets and funding basic services (and not so basic services like libraries and leisure centers). 

“A focus on pocketbook issues for the UK public should be welcomed by the UK’s payments and fintech industry – when people aren’t overstretched they spend instead of save, and this money goes back into the economy, ultimately passing through the payments ecosystem and contributing to the founding of businesses who can become our clients.

“I don’t imagine it will be an easy job – in fact reversing decades of managed decline sounds like one of the most difficult jobs in politics, but it’s what the country needs.”

Adam French, head of consumer finance at Moneyfactscompare.co.uk:

“Money markets had already begun pricing in fresh political uncertainty after last week’s by-election results, with gilts and swap rates rising by around 10 basis points and holding at those levels.

“As a result, Sir Keir Starmer’s resignation has prompted a fairly muted response so far, with the effects already largely reflected in funding costs.

“Episodes of political volatility tend to push up borrowing costs as investors demand a greater premium for perceived risk.

“Much will now depend on the fiscal policies put forward by future PM apparent Andy Burnham and anyone else vying for the Labour leadership, particularly their approach to taxation and public spending.

“The lessons of the 2022 mini-Budget remain fresh. Fiscal headroom is tight and money markets will be watching the UK closely.

“If plans don’t add up, the subsequent loss of confidence can quickly drive up borrowing costs. Once again, it is households which risk picking up the tab if market confidence is undermined.

“For those due to get a new mortgage later this year, there are steps they can take to reduce the risk of being caught out by rising rates.

“Many lenders allow borrowers to secure a new deal up to six months before their current mortgage ends, providing valuable protection should uncertainty push rates higher in the meantime.

“If rates do fall, borrowers can usually switch to a cheaper deal before completion without penalty.”

Simon Cox, managing director of Walter Cooper:

“Keir Starmer’s resignation will inevitably create further uncertainty at a time when the property sector needs more stability than ever. 

“We’ve already seen significant political churn in recent years, making it difficult for any Prime Minister to deliver the long-term planning and policy consistency required to unlock development.

“Whoever succeeds Starmer must understand the critical role that housing plays in driving economic growth. It’s important to support prosperity across all regions of the UK – a strong housing sector creates confidence, investment and economic activity that benefits the whole country.

“For the land market, certainty is critical. Landowners, developers and investors need confidence that planning reforms, housing targets and infrastructure commitments will remain on course. Without that, land transactions slow and much-needed development is delayed.

“The industry has no shortage of ideas on how to boost housing delivery and stimulate growth, but what we need, above all, is certainty. 

“The next Prime Minister must provide clear leadership, stand firm against internal rebellions and create the stable policy environment that businesses and investors need if we’re going to tackle the UK’s housing challenges and unlock much-needed development.”

Dean Leslie, director at GLPG:

“The resignation of Keir Starmer comes at a critical time for the UK housing market. You cannot tax, regulate and burden your way to more housing, yet that is exactly how many residential developers feel today.

“It will be interesting to see how financial markets react over the coming days. Any political uncertainty has the potential to influence gilt yields and swap rates, which were already elevated and volatile due to ongoing tensions in the Middle East. 

“Given the importance of borrowing costs to both developers and homebuyers, market reaction will be closely watched across the sector.

“Developers are doing everything they can to remain positive, buy sites, raise finance and deliver new homes, but the UK is becoming an increasingly difficult place to develop residential property. 

“At times, it feels as though government policy is focused on adding costs and complexity rather than helping the sector deliver the homes the country desperately needs.

“High interest rates, rising build costs, Section 106 obligations, Community Infrastructure Levy charges, Biodiversity Net Gain requirements, the forthcoming Building Safety Levy and an increasingly complex regulatory environment are all putting enormous pressure on viability. 

“For taller schemes above 18 metres, the Building Safety Regulator gateway process has introduced further cost, delay and uncertainty. 

“While each measure may be justifiable in isolation, the cumulative effect is significant, and many developers are now being forced to sit on their hands, not because they lack ambition or confidence, but because too many schemes simply do not make financial sense in the current environment.

“The biggest issue, however, remains demand. We need end user buyers back in the market. Developers will build homes if people are buying them, but right now, there is very little in government policy aimed at stimulating demand. 

“A meaningful reduction in stamp duty or the introduction of a new Help to Buy style scheme would make a world of difference, giving buyers the confidence to move, increasing transaction volumes and unlocking developments that are currently stalled.

“The affordable housing sector is beginning to see increased activity following the new Affordable Homes Programme, but the traditional build to sell market remains under significant strain. 

“If the next Prime Minister is serious about increasing housing delivery, they must focus not only on planning reform but also on creating the conditions that encourage people to buy homes.

“Developers are ready to invest, ready to take risks and ready to build the homes this country desperately needs. The private sector is willing to do its part. The real question is whether the next Prime Minister is prepared to do theirs.”

Adam Jennings, head of Residential at Chestertons: 

“Sir Keir Starmer’s resignation marks yet another chapter in a prolonged period of political instability for the UK, with the country set to have its seventh Prime Minister in a decade.

“In the short term, we may see property sellers and buyers adopt a ‘wait and see’ approach until there is greater clarity on the direction of government policy, particularly around housing, planning reform and the broader economy. 

“The devil will very much be in the detail in the coming weeks – not only in terms of who succeeds Sir Keir Starmer, but also the priorities they set out and the speed at which they are implemented.

“With this being said, London’s housing market has shown remarkable resilience through previous periods of political upheaval. 

“This latest uncertainty has arrived at a time when activity typically begins to slow ahead of the summer holidays, so there will be hope across the industry that a resolution is reached well before the busy autumn and pre-Christmas market. 

“The priority for any incoming Prime Minister will be to provide a stable and consistent policy environment that supports investment, encourages development and gives buyers the confidence to make long-term decisions.”

Matthew Robertson, co-founder and CFO of Valouran:

“Keir Starmer’s resignation brings yet another period of political uncertainty, and uncertainty has a direct and immediate cost to the property market. 

“When people don’t know what’s coming, they wait. We saw this play out ahead of the autumn budget last year, when the market effectively stalled in the run-up to it. 

“Buyers pause, deals are deferred, and the Treasury loses out too because there is no tax intake when no one is buying or selling.

“The studies are there, the economic case is clear, and any incoming administration serious about driving transaction volume and real growth across the wider economy needs to treat reform of property taxation as a priority from day one. 

“More broadly, the latest developments reinforce the importance of stability and certainty in policymaking. 

“Real estate investment is inherently long term, and businesses and investors need confidence that they can plan ahead without constantly worrying that a new tax, policy change or political event is just around the corner.

“We have seen repeatedly how periods of uncertainty can slow activity across the market. 

“If the priority is growth, then creating a stable environment in which people can make medium and long-term investment decisions with confidence must be part of the solution.”