UK government borrowing costs surge to highest since 2008 as PM Starmer pressured to quit

Yields on U.K. government bonds surged to multi-decade highs on Tuesday morning, as pressure mounted on Prime Minister Keir Starmer to resign from his post.

By 8:41 a.m. in London, the yield on the benchmark 10-year gilt had jumped 10 basis points to trade at around 5.103%. Bond yields and prices move in opposite directions.

The leadership of Keir Starmer is under growing pressure after more than 70 Labour MPs reportedly called for his resignation following heavy losses in last week’s local elections.

The U.K. has struggled with stagnant growth and falling living standards in recent years, with many households still feeling the impact of the Covid pandemic and the Russia-Ukraine war. Public frustration appears to have benefited both the right-wing Reform UK and the left-wing Green Party of England and Wales, which made significant gains in Thursday’s vote.

Despite the political turmoil, financial markets have generally favored Starmer and Chancellor Rachel Reeves remaining in office, with investors viewing potential alternatives as less stable. U.K. government bonds previously sold off sharply during earlier speculation about Reeves’ future.

Last July, gilt yields jumped after Reeves appeared visibly emotional in parliament amid reports her position was under threat. The uncertainty followed a government reversal on proposed welfare cuts after opposition from Labour MPs.