Long-term borrowing costs in the UK have surged to their highest levels in nearly three decades, primarily driven by investor concerns surrounding a potential shift in Labour leadership. This anxiety was linked to possible changes in Labour’s tax and spending strategies. Early on Tuesday, the yield on 30-year government bonds climbed by 11 basis points, reaching 5.794%, a peak not seen since May 1998.
However, these yields later eased slightly following assurances from Prime Minister Keir Starmer during a cabinet meeting. Starmer confirmed that he would not step down and that no leadership challenge had been initiated. Just before this meeting, Miatta Fahnbulleh became the first minister to resign after Labour suffered notable losses in recent local and devolved elections, urging Starmer to resign.
Starmer addressed the situation by stating, “The Labour party has a process for challenging a leader and that has not been triggered. The country expects us to get on with governing. That is what I am doing and what we must do as a cabinet.” His resolve, along with backing from several cabinet ministers, seemed to stabilize the frazzled financial markets.
Post-cabinet meeting, ministers like Peter Kyle, the business secretary, Liz Kendall, the technology secretary, and Steve Reed, the housing secretary, publicly declared their support for Starmer. This show of solidarity helped calm the markets, with the benchmark 10-year yield on UK government bonds falling back below 5.1%, after reaching 5.13% earlier. Similarly, the 30-year yield receded to 5.76%, following a fresh 28-year high of 5.81%.