Jefferies: Starmer unlikely to be in office by July
Sir Keir Starmer is likely to be ousted from office before the end of July, according to a top investment bank which warned that irrespective of whether there’s a change in leadership the Labour party is likely to lurch leftwards on economic policy.
Analysts at Jefferies said the Prime Minister had been left vulnerable by a succession of damaging news stories, meaning there are now “60 per cent odds of him leaving by the summer”.
“If Starmer stays, it is likely to be through concessions to the left-leaning camp of Labour,” they wrote in a regular macroeconomic strategy note. “If Starmer goes, he is likely to be replaced by a left-leaning candidate. Either scenario would be negative for the fiscal picture in the UK.”
The PM is in the process of pushing through a complete overhaul of his Downing Street operation after what has been the most perilous period of a challenging 19-month tenure. Last week, his chief of staff, Morgan McSweeney, resigned over the instrumental role he played appointing disgraced politician Peter Mandelson as US ambassador, sparking a wider reset of key personnel.
The episode set off a bout of frenzied speculation over Starmer’s own future, which culminated in Anas Sarwar, the leader of Scottish Labour, demanding he step down, before cabinet ministers granted him a stay of execution with a flurry of public support.
Since then, the Labour leader has also parted ways with the most senior civil servant in Whitehall, and is currently dealing with fallout from a think tank credited with navigating Labour’s return to power commissioning a PR agency to dig up kompromat on two Sunday Times journalists.
Starmer speculation damaging for ‘fiscal picture in UK’
Strategists at Jefferies, an American investment bank, said the damaging period for Starmer has left them more “concerned about the fiscal picture in the UK”, and that any leftward move on fiscal policy would be negative for Britain’s growth prospects and public finances.
“Fiscal concerns would need either tax rises or spending cuts,” they wrote. “Unfortunately, we are at a stage where further tax rises are becoming counterproductive and would be a negative for growth. Spending cuts would also be negative for growth. Risk is also that populist policies divert funds into less productive areas.”
The bank’s growth projections for the UK are 0.4 per cent lower than those made by the fiscal watchdog. This weaker economic outlook will force the Bank of England to cut interest rates by more than markets are currently pricing in, they predicted, before settling at a neutral rate of three per cent.
“With fiscal concerns unlikely to go anytime soon, we see continued steepening pressure on the curve,” the analysts added, referring to the difference between the cost of short-term and long-term government borrowing that often signals a lack of faith from markets in the government’s grip on the public finances.