Date first published: 23/06/2026
Key sectors: all
Key risks: political instability, fiscal consolidation
Risk development
Prime Minister Keir Starmer announced his resignation on 22 June 2026, less than two years after leading Labour to a landslide general election victory. Labour won the 2024 general election with a majority of 172 seats, but since then, a weak economy and controversy over the appointment of Peter Mandelson as ambassador to Washington eroded confidence in the government. The May local elections proved to be the catalyst for open challenges to his leadership, with the party losing more than 1,100 council seats and ceding control of Wales.
The immediate trigger for Starmer’s resignation was Andy Burnham’s victory in the Makerfield by-election on 18 June, which cleared the path for a leadership challenge. Former health secretary Wes Streeting, who had resigned from cabinet in May and indicated he would contest any leadership race, subsequently withdrew and endorsed Burnham. Nominations for the leadership open on 9 July. Absent a significant shock, Burnham will become prime minister by the end of the summer.
Why it matters
Burnham’s victory and ascension are significant for the future of the country. Makerfield was a Reform UK target seat. In the May 2026 local elections, Reform had won every council ward in the constituency with around 50 per cent of the vote. Burnham’s ability to reverse that trajectory, winning an absolute majority with 54.8 per cent of the vote, showed his ability to consolidate Liberal Democrat and Green voters behind Labour through effective personal appeal. The result strengthened the argument that he is better placed than Starmer to hold back Nigel Farage’s Reform at the next general election, which must be held by August 2029.
The challenges ahead are nonetheless substantial. The UK’s budget deficit reached GBP23.3bln in May 2026, the highest for that month in six years, and bond markets have grown sensitive to any signal that a new government might loosen existing fiscal rules. Burnham has moved to reassure investors, but the tension between his platform of reindustrialisation, public service improvement and investment on one hand, and the constraints imposed by both the country’s fiscal position and the Treasury’s demands for fiscal prudence is hard to resolve. Immigration and the cost of living remain the dominant voter concerns, neither of which has easy solutions. And while media coverage of him has largely been positive thus far, it could easily turn sour.
Background
Burnham, 56, first entered parliament in 2001 and served in the cabinets of Tony Blair and Gordon Brown, rising to health secretary. He ran for the Labour leadership twice, in 2010 and again in 2015, finishing second to Jeremy Corbyn in the latter contest. His departure from Westminster to become mayor of Greater Manchester in 2017 proved fortuitous: it allowed him to sidestep the factional conflicts of the Corbyn era while building a record in regional government.
Risk outlook
A Burnham premiership would represent a change of style and emphasis rather than a fundamental break with the economic framework inherited from Starmer. The structural pressures bearing on the government, slow growth, strained public finances, an immigration debate it has struggled to shape and a resurgent Reform UK, will not be eliminated by a change of leader. Burnham may prove more adept than Starmer at consolidating the anti-Reform vote and projecting a coherent political identity, but the question of whether that is sufficient to win a general election is unclear. There is a risk that expectations built during his years outside Westminster will prove difficult to meet once he is inside Downing Street and subject to many of the same challenges that his predecessor faced.