UK Prime Minister faces leadership challenge: Health Secretary resigns, "King in the North" plans to return to Parliament, GBP drops nearly 1% in the session

UK Prime Minister Starmer is facing the most severe political crisis since taking office.

On Thursday the 14th, local time, the “coup” within the ruling Labour Party escalated: UK Health Secretary Wes Streeting announced his resignation and publicly called for a leadership contest within the party; at the same time, Manchester Mayor Andy Burnham secured a route back into Parliament, which is widely seen as paving the way for him to compete for the Labour Party leadership—and even the premiership.

The political turmoil quickly spilled over into the FX markets. After news of Streeting’s resignation broke during European stock trading hours on Thursday, the pound sterling against the US dollar saw its decline accelerate rapidly. During the US market session, after Burnham announced he would seek to return to Parliament via a by-election, the pound plunged further, briefly falling below 1.3400—hitting a new intraday low since April 13—with an intraday drop of nearly 1%.

Market participants believe that investors have started repricing the UK’s political uncertainty, worrying that Labour could fall into chaos similar to the Conservative era’s frequent “Prime Minister changes.”

Health Secretary’s sudden resignation and public call for Starmer to step down

The trigger for this round of crisis was the sudden defection by Streeting, a heavyweight figure within Labour.

According to reports by Reuters, the Guardian, and other media, Streeting stepped down as Health Secretary on Thursday and publicly stated that continuing to stay in the cabinet “is no longer honorable,” calling for Labour to hold a leadership election.

Streeting has long been regarded as one of the potential figures in Labour for the “post-Starmer era.” He had originally been an important ally of Starmer, but recent differences between the two have rapidly become publicly visible. Reports said that Streeting criticized Starmer for lacking a clear vision and for being unable to lead Labour to victory in the next general election.

It is also notable that Streeting has not immediately formally announced his candidacy for party leader. Analysts believe an important reason is that his level of support within the parliamentary party is not yet sufficient to guarantee him a spot on the final contest list. Under Labour Party rules, leadership candidates need to secure support from a significant number of MPs.

However, his resignation itself has already been viewed as an important signal that the Labour Party’s top-level “coup” has entered an open phase.

Media reports said that recently, multiple Labour MPs and government officials have publicly questioned Starmer’s leadership, and some have even called on him to set out a departure timetable. Labour’s poor performance in recent local elections has further accelerated the spread of anxiety within the party.

“King of the North” Burnham intends to return to Parliament and is seen as the strongest challenger

Compared with Streeting, what may attract more attention in the market is Burnham’s latest move, as Manchester Mayor. Polling data shows that he is one of the most popular politicians in the UK at present.

On Thursday, Labour MP Josh Simons suddenly announced he was stepping down as an MP, paving the way for Burnham to run in a by-election and return to Parliament.

Because the leader of the UK Labour Party typically must be an MP in the House of Commons, Burnham previously—despite his high popularity—has always lacked the qualification to challenge Starmer. Now, this institutional obstacle is being removed.

Media say that Burnham is now widely viewed as one of the most capable contenders to challenge Starmer.

Burnham was born in the suburbs of Liverpool. After moving into journalism, he worked for trade unions and became an adviser to Tony Blair’s government in the late 1990s. He was elected as an MP in 2001 and was later promoted to cabinet roles, including serving as Health Secretary in the Gordon Brown government. After failing in bids for Labour Party leader in 2010 and 2015, Burnham stepped down as an MP in 2017 and became the first Mayor of Greater Manchester.

During his leadership of Manchester, Burnham in recent years has built up a large base of supporters in the northern regions of the UK through reforms in public transportation, local governance, and policy positions that are more “soft left.” The media has dubbed him the Labour Party’s “King of the North.”

Multiple polls show that Burnham’s approval rating among ordinary voters and Labour’s grassroots is even higher than Starmer’s. In some surveys, Labour supporters are more inclined to have Burnham—not Starmer—serve as Prime Minister.

However, Burnham currently maintains a relatively cautious stance. He has not publicly announced a challenge to Starmer, but has said he hopes to “give the government space for stability.” Still, the market generally believes that his move to return to Parliament itself carries a very strong political signal.

Why has Starmer suddenly fallen into a “governing crisis”?

Just a little over a year ago, Starmer led Labour to end the Conservatives’ long period in power and was seen as the “stability man” in UK politics.

But now, his approval ratings have clearly deteriorated.

Analysts believe the core reasons behind Starmer’s crisis include:

• The UK’s weak economic recovery, and continued public dissatisfaction with the cost of living;
• After taking office, Labour failed to deliver on some of its reform promises;
• Backlash from policies such as cutting winter fuel subsidies;
• Labour’s poor performance in recent local elections;
• The rapid rise of right-wing populist forces such as Reform UK.

More importantly, internal Labour concerns have begun to grow: if Labour continues to be led by Starmer, it may not be able to hold onto power in the next nationwide general election.

This has also gradually shifted talk of “changing the leader early” from behind-the-scenes discussions to the forefront.

Even so, Starmer is still refusing to resign. On Thursday, he said he will “fight to the end,” and warned that leadership infighting within the party could plunge the UK back into political chaos.

If the UK “changes Prime Minister,” what do financial markets worry about most?

For financial markets, what truly unsettles investors is not just “who becomes Prime Minister,” but whether the UK will once again fall into sustained political infighting.

After frequent leadership changes during the Johnson, Truss, and Sunak periods, markets originally hoped that a Labour government would bring long-term stability. Now that internal Labour struggles have reignited, it suggests that the UK’s political risk premium could return.

Institutional analysts believe that if Labour triggers a leadership contest:

• The pound may continue to come under pressure in the short term;
• Volatility in UK government bonds may rise;
• Investors will re-evaluate the UK’s fiscal discipline and the path of economic reforms.

However, most analysts also point out that regardless of whether Streeting or Burnham ultimately succeeds, the broad direction of the UK’s macro policy is unlikely to undergo a dramatic “Truss-style” shift.

The real risk, more likely, comes from long-term political uncertainty itself.

Risk warning and disclaimer

        There are risks in the market; you should exercise caution when investing. This article does not constitute personal investment advice, and it does not take into account the special investment goals, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their particular circumstances. Invest accordingly at your own risk.