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(Bloomberg) -- UK Health Secretary Wes Streeting resigned and called for a leadership contest to oust Prime Minister Keir Starmer, plunging the ruling Labour party into crisis and raising the political risk premium on UK assets.
"Where we need vision, we have a vacuum. Where we need direction, we have drift," Streeting wrote in a stinging resignation letter, adding that it is “clear that you will not lead the Labour Party into the next general election.” A source close to Streeting said he had the necessary 81 signatures from lawmakers to mount a formal challenge but chose not to trigger an immediate contest.
The move follows disastrous results for Labour in last week's local elections and ratchets up pressure on the prime minister. The probability of Starmer leaving his post by the end of June jumped to 47 percent, according to the prediction market platform Polymarket. Despite the political turmoil, the market reaction was muted, with the 30-year UK government bond yield falling about five basis points to 5.69 percent.
The crisis overshadows recent positive economic news, including first-quarter GDP growth of 0.6 percent, the fastest in a year. "Don't put the economy at risk by plunging the country into chaos," Chancellor of the Exchequer Rachel Reeves warned colleagues on Thursday.
Streeting’s resignation makes him the first cabinet minister to quit over the leadership crisis, but several other potential contenders are waiting in the wings, creating a fluid and unpredictable situation for the governing party.
Angela Rayner, the former Deputy Prime Minister popular with Labour's left-wing, is a leading candidate after announcing she had been cleared of wrongdoing in a tax investigation, removing a key obstacle to a potential run. Rayner told the Guardian that Starmer should “reflect on” his position and that she was ready to “play my part” in any contest.
Other names being floated include Armed Forces Minister Al Carns, a former Royal Marine whose compelling backstory could appeal to various party factions, and Greater Manchester Mayor Andy Burnham. However, Burnham is not currently a Member of Parliament and would need to secure a seat in a special election, a process that could take months.
While a growing rebellion of more than 80 Labour MPs has urged Starmer to set a departure timetable, the prime minister has vowed to fight any challenge to his leadership. This sets the stage for a potentially prolonged and messy battle that could paralyze the government for months.
To formally trigger a contest, a challenger must secure the signatures of 20 percent of Labour MPs, which currently stands at 81. Streeting’s allies claim he has this support but is instead pushing for an orderly timetable for Starmer's departure to allow for a "broad" field of candidates. This has been interpreted by some as a move to pave the way for a candidate like Burnham, who is not yet eligible to run.
The instability has drawn concern from the business community. Amanda Blanc, CEO of Aviva, one of Britain's largest financial firms, complained that the constant political turmoil is "harmful to a major economy such as the UK and how we are perceived abroad."
This article is for informational purposes only and does not constitute investment advice.
