Former Greater Manchester mayor Andy Burnham has succeeded Keir Starmer as prime minister, becoming the seventh to hold the title in just 10 years.
In his first speech in front of Number 10, Burnham pledged to make politics work better, noting this would be a “circuit-breaker” moment for Britain and promising a new political and economic model. As part of this, Burnham said a 10-year plan to reindustrialise the UK would be published later this year.
In the more immediate future, new measures to tackle the impact of the cost-of-living crisis and give people more “breathing space” will be announced on Tuesday, the prime minister revealed.
David Roberts, head of fixed income at Nedgroup Investments, said: “If you’d asked me a few months ago, I would never have said this, but the new UK prime minister Andy Burnham is almost like Mr Stability at the moment.
“It’s almost like the old saying: ‘The lesser of several evils’… he’s Mr Coalescence, the glue that could bind the current government together.”
However, there remain several challenges to contend with, including some unpopular changes made under Starmer’s government to pensions, ISAs and tax.
Burnham has pledged to adhere to the government’s current fiscal rules.
Schroders’ global fixed income team has warned that “any deviation from this stance would be difficult for the gilt market to ignore”.
Appointments to Burnham’s Cabinet, including chancellor Rachel Reeves’ successor, are expected to be announced over the course of the day.
Below, experts share their opinions on what the new prime minister means for markets and what people will want to see early on in his premiership.
A ‘muted response’
Tom Stevenson, investment director at Fidelity International, said: “In more normal circumstances, a new UK prime minister might be expected to dominate the headlines. In market terms, however, the transition has so far prompted a relatively muted response.
“Attention now focuses on what the first 100 days will bring. More importantly from a market perspective, the more significant question may be what measures are announced in the autumn Budget.”
Focus on Number 11
Peter Davies, head of direct fixed income at Canaccord, said investors will be looking for more details on Burnham's policy agenda, cabinet appointments and the new government's economic strategy.
In particular, there will be a sharp focus on who resides at Number 11 Downing Street, with frontrunner Shabana Mahmood “generally received positively by markets,” he said.
“Investors view her as a right-of-centre and pragmatic figure, although the identity of the chancellor is likely to matter less than the new government's broader approach to growth, taxation and public spending. Attention will therefore focus on Andy Burnham's wider economic agenda in the coming weeks,” he said.
'No shortage of ambition'
Helen Miller, director at the Institute for Fiscal Studies, said the new prime minister enters Downing Street "with no shortage of ambition".
"Greater devolution, more public control of utilities and a new council house building programme are among the promises that helped carry him into office. Delivering on any one of those agendas would be challenging. Seeking to rewire the British state against a backdrop of constrained public finances and with an in-tray full of domestic and international challenges will require much more than ambition," she said.
"If the new government is to make progress this decade, it will need to quickly flesh out the vision of what it wants to achieve and be ruthless in its prioritisation."
'Restoring stability will be crucial to boosting confidence'
Susannah Streeter, chief investment strategist at Wealth Club, said Burnham is “under pressure to unlock UK growth”, with one of his first challenges being to restore stability.
“Andy Burnham is inheriting an economy where political turmoil has become a defining feature of the landscape, so restoring stability will be crucial to boosting confidence,” she said.
“He will be the seventh prime minister in a decade, so investors will want to see a reset and reassurance that the economic landscape will remain predictable enough to justify committing capital for the long term.”
Likely Burnham beneficiaries
Angeline Ong, senior technical analyst at IG, highlighted housebuilders as one area of the market that should perform well under Burnham, who used his opening speech to call for more council houses.
“While the policy lacks detail at this stage, any meaningful expansion of social housing would represent a clear demand driver for the UK's affordable housing supply chain,” she said.
Northern-based infrastructure projects should also get a boost from Burnham's leadership and “a renewed focus on transport connectivity and regional regeneration would favour the UK's major infrastructure contractors”.
Lastly, the new prime minister looks set to uphold Starmer's proposed £15bn increase in defence spending, albeit centred as much on industrial strategy as national security.
“His emphasis on rebuilding sovereign manufacturing capability, strengthening domestic supply chains and accelerating investment in next-generation technologies such as AI and quantum computing points to a broader re-industrialisation agenda,” said Ong.
The case for UK small-caps
Each shift in leadership brings fresh uncertainty over tax, spending and regulation, which usually propels investors away from more domestically oriented small-caps.
However, Stuart Widdowson, co-manager of Odyssean Investment Trust, said the medium- to long-term value creation prospects of high-quality UK smaller companies remains “largely independent of who occupies Downing Street”.
“Many smaller companies are UK-listed in name only, generating the bulk of their operations, revenues and profits overseas,” he said.
“Others are being reshaped from within, with proactive management teams driving genuine strategic and operational transformation. In both cases, value creation owes little to a supportive UK macro environment or fiscal backdrop and as such they are largely insulated from the domestic picture.”