UK MPs turn on PM Starmer, analysts say he’s unlikely to last the year

U.K. Prime Minister Keir Starmer’s leadership is hanging by a thread as a growing number of his own party’s lawmakers call on the Labour Party leader to resign.

The move against Starmer comes after the ruling Labour Party performed badly in local elections last week, losing votes to parties on both the left and right of the political spectrum.

CNBC has a brief guide to what’s going on and what could happen next in the U.K.

Starmer’s premiership is on a knife-edge this week as a significant number of Labour Party MPs have openly mutinied, calling for the PM to resign immediately, or to set out a timetable for his departure.

As of Monday evening, 77 Labour MPs were calling for Starmer to quit, with Home Secretary Shabana Mahmood the most prominent voice to call on the PM to stand down.

The first ministerial resignation came on Tuesday with the departure of Miatta Fahnbulleh, a junior minister in the housing and communities department, who called on Starmer to “do the right thing for the country and the Party and set a timetable for an orderly transition.”

“The public does not believe that you can lead this change – and nor do I,” she posted on X.

In a speech on Monday designed to bolster support among Labour colleagues, Starmer took responsibility for the party’s disastrous performance in last week’s local council elections. The result was seen as a litmus test of national public support for Labour and he acknowledged that he had “doubters.”

He also pledged to “face up to the big challenges” facing the country and to focus on national security, immigration and forging closer ties with Europe. The speech failed to impress party insiders, however, and several ministerial aides quit later on Monday.

“Starmer’s attempt to quell a rebellion against his leadership has failed,” Eurasia Group analysts noted.

“Although he may remain a few more months in Downing Street, he is still fighting for his political life after his make-or-break speech earlier Monday did not include enough new policies to satisfy many Labour MPs,” they noted.

Momentum is not on Starmer’s side, according to Jordan Rochester, head of EMEA fixed income, currency and commodity strategy at Mizuho, commented Tuesday.

“For many, the writing is on the wall at this stage, it’s just a matter of how quickly the exit happens … [Nonetheless] If Starmer goes, it will make history. No sitting Labour PM yet has ever faced a leadership challenge or been removed by his party,” he noted.

In a sign of markets’ disquiet over the precarious political situation, U.K. government borrowing costs surged on Tuesday morning to their highest level since 2008.

There have been rumblings of discontent among Labour Party MPs and large sections of the electorate for some time. Of particular concern has been the government’s apparent failure to contain illegal immigration, particularly by boats crossing the English Channel, and unpopular efforts to cut welfare spending.

A series of policy U-turns led to the Labour government being characterized as weak and indecisive — and beholden to its influential backbench MPs. This has undermined its credibility among investors too.

The catalyst for Starmer’s latest political crisis was Labour’s dire performance in local council elections last week, which saw voters flock to both the right-wing Reform UK party and the left-wing Greens. In all, Labour lost control of more than 30 councils acorss England, and around 1,500 councillors were defeated.

Starmer held a crunch meeting with government colleagues on Tuesday morning, with his office concurrently issuing a statement insisting the prime minister does not intend to quit.

“The Labour Party has a process for challenging a leader and that has not been triggered,” the statement said.

“The country expects us to get on with governing. That is what I am doing and what we must do as a Cabinet. The past 48 hours have been destabilising for government and that has a real economic cost for our country and for families,” it continued.

Despite Starmer’s defiance, his leadership team was reportedly split on what the PM should do next, with the BBC and Financial Times both reporting mixed messages from cabinet ministers on Monday night — with some urging Starmer to fight on and others saying he should consider leaving office. The Telegraph newspaper reported Tuesday that six cabinet ministers (out of 22) were expected to tell him to quit.

Political analysts say Starmer’s time as prime minister are drawing to an end, but when and how he leaves is still in question. Eurasia Group on Monday evening raised the probability of Starmer being ousted this year to 80%, up from 65% previously. Conversely, there is now only a 20% chance of Starmer remaining PM.

“The most likely scenario is that MPs will force a leadership election by September (a 35% probability); there is a 25% chance of an orderly transition in which Starmer agrees to stand down and a 20% probability of an immediate leadership election,” Eurasia Group analysts led by Mujtaba Rahman noted in emailed analysis Monday.

The British press on Tuesday honed in on Starmer’s failure to convince critics that he should stay in office, predicting his imminent downfall. His potential replacement is in focus for both the media and markets.

Potential leadership challengers include Manchester’s Mayor Andy Burnham, although he would have to become an MP to stand in any leadership race. Starmer’s former deputy, Angela Rayner, and current Health Secretary Wes Streeting, are also seen as possible contenders. As yet, none have made a move to challenge Starmer, however.

Economists warn that any contender could loosen the purse strings when in office, reversing efforts to curb spending and debt. This could send shock waves through markets and spook investors who are already worried about the U.K.’s struggle to tame inflation and boost growth.

Deutsche Bank strategists noted Tuesday that the rise in the interest rate on the U.K.’s 10 and 30-year borrowing costs, to 5% and 5.67%, respectively on Monday, reflected market concerns that a new Labour leader “may face pressure to ease the fiscal rules and raise gilt issuance.”

Tuesday’s cabinet meeting “could be a big day in determining Starmer’s future,” they added, in emailed comments.