The pound’s relatively steady performance following Keir Starmer’s resignation reflects relief that a period of political uncertainty has ended and that Labour appears set to avoid a prolonged leadership battle, according to the CEO of one of the world’s largest independent financial advisory organisations.
Nigel Green, CEO of deVere Group, says markets have remained notably composed despite the dramatic political development, with sterling holding broadly firm and avoiding the type of sharp sell-off that often accompanies unexpected leadership upheaval.
“For a prime ministerial resignation, the reaction in sterling has been surprisingly restrained.
“This says more about how investors felt about Starmer than how they feel about Burnham.
“Part of the market response reflects relief. Relief that Starmer has gone. Relief that Labour appears to have avoided months of infighting and uncertainty over who takes charge.
“Markets dislike drift and uncertainty. They dislike governments that appear unable to set a clear economic direction.
“Starmer’s departure removes some of those concerns.
“But the market has not yet delivered its verdict on Burnham.
“Investors are still assessing what his approach to taxation, wealth, spending and investment could mean for Britain’s economic outlook. That process is only just beginning.”
The comments come as Andy Burnham emerges as the overwhelming favourite to succeed Starmer following the Prime Minister’s decision to step down.
Nigel Green says investors are now turning their attention towards the economic implications of a Burnham premiership.
“The market’s calm should not be mistaken for an endorsement of Burnham.
“He has not been tested by investors yet. But it starts imminently.”
The deVere CEO notes that Burnham has spent years arguing that Britain taxes work too heavily and wealth too lightly, a position that is likely to receive intense scrutiny from investors in the coming weeks.
“Markets are already beginning to look beyond the leadership contest itself and towards what a Burnham government could mean for wealth, property, capital and investment.
“Those issues matter because they influence where money flows, where businesses invest and how investors assess Britain relative to competing jurisdictions.”
Nigel Green says investors will be watching closely for signals on taxation, spending, borrowing and the future of Chancellor Rachel Reeves, whose economic agenda became closely associated with Starmer’s leadership.
“Rachel Reeves was central to Labour’s effort to rebuild credibility with financial markets.
“Investors will want clarity on whether that framework survives under new leadership.”
He warns that today’s relative market stability should not be confused with certainty about Britain’s future economic direction.
“Markets have welcomed the removal of one source of uncertainty.
“The next phase centres on assessing another.
“Investors will want to understand how a Burnham government would approach wealth, taxation, investment and growth.
“Those answers matter for sterling, they matter for gilts and they matter for Britain’s ability to attract capital.”
Nigel Green concludes: “The pound has given Burnham the benefit of the doubt.
“That’s very different from giving him a vote of confidence.
“Today’s relative stability reflects relief that the uncertainty surrounding Starmer has ended and that Labour appears to have avoided a prolonged internal battle.
“Investors have not yet started pricing the reality of a Burnham government.
“They’re still trying to understand what his views on wealth, taxation, investment and public spending could mean in practice.
“Sterling’s resilience will ultimately depend on one thing: confidence.
“If investors conclude that Britain remains an attractive place to invest, build businesses and allocate capital, the pound can remain well supported.
“If they see higher risks to growth, investment and capital formation, sterling will come under significant pressure.”
