LONDON, May 13 : Britain faced renewed political and financial instability on May 12 as mounting pressure on Prime Minister Keir Starmer rattled financial markets and pushed government borrowing costs to multi year highs.
UK bond yields surged sharply amid speculation about leadership challenges within the ruling Labour Party. Investors grew increasingly concerned about possible shifts in fiscal policy and the prospect of higher public spending.
The yield on 30 year UK government bonds climbed to levels not seen since the late 1990s, while the pound weakened against major global currencies. Banking shares also declined amid fears of possible tax increases under a new political leadership scenario.
Several senior ministers reportedly urged Starmer to consider an orderly transition after internal divisions intensified within the government. Though cabinet allies publicly defended the prime minister, uncertainty continued to weigh heavily on investor confidence.
Economic pressure has also increased because of rising oil prices linked to Middle East tensions. Inflation concerns have returned globally, reducing hopes of rapid interest-rate cuts by major central banks.
Business leaders warned that prolonged political instability could damage Britain’s economic recovery and reduce foreign investment. JPMorgan chief executive Jamie Dimon reportedly cautioned against major tax increases, suggesting such moves could impact corporate investment decisions in London.
Opposition parties accused the government of failing to provide economic clarity at a time when households are already struggling with higher living costs.
Analysts compared the growing volatility to the 2022 market turmoil triggered by former Prime Minister Liz Truss’s economic plans, although officials insisted Britain’s financial system remained stable.
The coming weeks are expected to be crucial for Starmer’s political future as Labour lawmakers debate leadership options while markets closely monitor government policy decisions.