ABN AMRO economists Bill Diviney and Larissa de Barros Fritz assess the economic and market implications of UK Prime Minister Starmer’s resignation and the likely succession of Andy Burnham. They argue Burnham’s left-leaning, redistributive agenda should be funded by tax rises on the wealthy, while broadly maintaining existing fiscal rules and keeping the UK on a fiscal consolidation path, limiting Gilt market disruption.

Burnham succession seen fiscally disciplined

"As we said in our Top of Mind webinar, Burnham will almost certainly go on to become the UK’s next prime minister."

"In a scenario where there is no other leadership contender to Burnham, he could already become PM by late July."

"Andy Burnham leans to the left of Keir Starmer, and he is likely to take measures to ease cost of living pressures on low income households, but we expect any such moves to be funded by tax rises on the wealthy."

"Most importantly from a financial markets point of view, we expect Burnham to broadly stick to the current fiscal rules; put another way, we view the likelihood of a ‘Liz Truss’-style testing of bond markets to be very low."

"Indeed, our base case sees the UK staying on a fiscal consolidation trajectory, with the budget deficit a expected to fall from 5.2% in 2025 to c3.5% in 2026/27."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)