European Daily: UK—Q&A on the Macro Policy and Markets Outlook Following Prime Minister Starmer’s Resignation

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European Daily: UK—Q&A on the Macro Policy and Markets Outlook Following Prime Minister Starmer’s Resignation

Economics Research

22 June 2026 | 8:57PM BST

European Daily: UK—Q&A on the Macro Policy and Markets Outlook

Following Prime Minister Starmer’s Resignation

n Andy Burnham is widely expected to succeed Starmer as Prime Minister after the James Moberly

+44(20)7774-9444 |

Labour leadership process opens on July 9, with the contest potentially james.r.moberly@gs.com

Goldman Sachs International

concluded as early as mid-July if he is the only nominee. The main near-term

Sven Jari Stehn

uncertainty is the choice of Chancellor, with prediction markets now viewing Wes +44(20)7774-8061 | jari.stehn@gs.com Goldman Sachs International

Streeting as the favourite.

n A Burnham government would likely emphasise public investment (including

transport infrastructure and social housing) and social care spending. These

priorities would add to already significant spending pressures from defence,

health and constrained departmental budgets.

n Financing higher spending through tax increases looks challenging given Labour’s

manifesto commitments on VAT, employee National Insurance, income tax rates

and corporation tax. Property, land and capital gains tax reforms could raise

some revenue, but the revenue upside would likely be limited.

n Increased spending pressures and limited tax room point to risks of higher

near-term borrowing and slower fiscal consolidation, although market and

monetary policy constraints would likely limit any fiscal loosening. Higher

borrowing would likely keep gilt term premia elevated, while UK midcaps, real

estate, homebuilders and domestic banks appear more exposed to political and

policy shifts than the FTSE 100.