(The Daily Telegraph, by Tom Saunders and Chris Price, May 14, 2026)
Major international investors are selling or avoiding UK government bonds (gilts) due to the leadership crisis engulfing Sir Keir Starmer, with Jupiter Asset Management reducing its positions, Edmond de Rothschild avoiding long-dated bonds, and Jefferies expressing specific concern for the UK, fearing a worsening of fiscal policy if a more left-wing leader were to emerge.
Experts warn that replacing Starmer with figures like Andy Burnham or Angela Rayner could trigger a chain reaction in the markets, with yields already soaring to multi-decade highs, reducing the government’s fiscal space and threatening Chancellor Rachel Reeves’ plans for £12 billion.
The political crisis, with nearly 100 Labour MPs calling for Starmer’s resignation and ministerial resignations forthcoming, adds to global inflation and geopolitical tensions, making the UK particularly vulnerable compared to other countries and putting the country’s financial stability at risk.
Flight from gilts due to political instability.
“Major investors are turning their backs on UK government bonds as Sir Keir Starmer faces a leadership crisis. Jupiter Asset Management has reduced its gilt positions over fears of political instability.”
Chain reaction if the left wins.
“The risk is that a left-wing candidate who wants to loosen fiscal rules arrives. There could be a chain reaction if someone like Andy Burnham or Angela Rayner enters Downing Street. If bond markets are lost, goodnight UK.”
Concerns from Jefferies and others.
“Jefferies is avoiding long-term government bond bets globally […] but is ‘more concerned about the UK’ due to the ‘additional impact of the ongoing political crisis.’”
Yields at historic highs.
“The government’s long-term borrowing costs are near 28-year highs. The 30-year gilt yield has reached its highest level since 1998.”
£12 billion blow for Reeves.
“Goldman Sachs has warned that Rachel Reeves, the Chancellor, faces a £12 billion hit to public finances as the chaos over Starmer’s leadership has reduced her fiscal space.”
(Excerpt from the newsletter by Giuseppe Liturri)
