UK premiership instability deepens as Starmer faces exit amid market and approval pressure

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UK premiership instability crisis

Highlights

Keir Starmer faces imminent resignation after net satisfaction plunges to minus 54 within his first year, the fastest decline among recent prime ministers.
Ipsos finds Starmer with the lowest net favourability rating of any major UK party leader, with only about 20 percent public favourability and record-high ministerial resignations.
10-year gilt yields spike to 5.1 percent after calls for Starmer’s exit, business confidence hits post-Liz Truss era lows amid ongoing political uncertainty and fiscal volatility.

Approval slump and resignation pressure

As reported by the Financial Times, Starmer is widely expected to announce that he will leave office, a move that would make him the fifth consecutive UK prime minister not to complete a full parliamentary term.

The pressure on his leadership builds after a steep deterioration in public standing. Ipsos data shows net satisfaction with the prime minister falls to minus 54 within his first year, a decline that comes faster than for recent predecessors including Rishi Sunak, Boris Johnson, Theresa May and David Cameron.

Public perceptions have also worsened over the past two and a half years, leaving Starmer with the lowest net favourability rating of any major UK party leader in Ipsos's latest poll. Only about a fifth of the British public holds a favourable view of him earlier this month, far below the 58 per cent with an unfavourable view, while Chancellor Rachel Reeves records an even weaker net favourability score and is expected to be replaced if Starmer goes.

His political weakness is also reflected in ministerial turnover. More ministers resign from his government than from the administrations of May and Johnson at the same stage, with the latest departures, defence ministers John Healey and Al Carns, protesting over what they see as insufficient military funding.

Bond market sensitivity and business impact

Financial markets remain highly sensitive to the government's fiscal stance, with bond volatility emerging as a recurring challenge for Starmer's administration. Uncertainty over spending plans and fiscal rules repeatedly pushes up yields and leaves the UK more exposed than peer countries to global shocks, including the Iran war.

Even so, investors still view Starmer and Reeves, because of their commitment to fiscal rules, as preferable to many rivals. Calls for Starmer's resignation after the May local elections send 10-year gilt yields to 5.1 per cent, close to their highest level since 2008.

Business confidence has also weakened despite Labour's promise to revive growth. According to the CBI growth indicator, sentiment in the past year twice reaches lows last seen in the aftermath of Liz Truss's mini Budget, showing how political uncertainty since the 2024 election continues to weigh on British companies and the wider economy.

In our earlier article on sterling sliding amid growing speculation about Keir Starmer’s exit, we noted that leadership uncertainty was quickly feeding into currency moves and raising expectations of near-term volatility. We also highlighted that investors were watching the UK gilt market closely, with yields near post-2008 highs as markets weighed whether a potential successor would keep existing fiscal rules and what that could mean for borrowing costs.

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