ABN AMRO economists Bill Diviney and Larissa de Barros Fritz analyzed the economic and market implications of UK Prime Minister Starmer’s resignation and the anticipated succession of Andy Burnham. According to their assessment, Burnham is almost certain to become the UK’s next prime minister, potentially as early as late July if there are no other leadership contenders [1].
Burnham is described as leaning to the left of Keir Starmer, with expectations that he will implement measures to ease cost of living pressures on low income households. However, ABN AMRO expects these initiatives to be funded by tax increases on the wealthy, rather than through increased borrowing [1].
From a market perspective, the economists emphasize that Burnham is likely to broadly maintain existing fiscal rules, reducing the risk of significant Gilt market disruption. They explicitly state that the likelihood of a 'Liz Truss'-style market event is very low under Burnham’s leadership [1].
The base case presented by ABN AMRO projects the UK will remain on a fiscal consolidation path, with the budget deficit expected to decrease from 5.2% in 2025 to approximately 3.5% in 2026/27 [1].
CONCLUSION
ABN AMRO views Andy Burnham’s likely succession as UK Prime Minister as fiscally disciplined and market-friendly, with limited risk of bond market volatility. The anticipated adherence to fiscal rules and a declining budget deficit are expected to reassure investors.