British MPs slam Starmer, analysts say he is unlikely to survive this year

British Prime Minister Keir Starmer’s leadership is on the brink as a growing number of Labor MPs call on him to resign.

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

CNBC has a quick guide to what’s happening in the UK and what could happen next

Mr Starmer’s premiership is in jeopardy after a number of Labor MPs staged a public revolt this week, demanding that he either resign immediately or set a timetable for his departure.

As of Monday night, 77 Labor MPs had called for Mr Starmer to resign, with Home Secretary Shabana Mahmood the most prominent voice calling for the Prime Minister to resign.

The first ministerial resignation took place on Tuesday with the resignation of Miatta Fernbulle, Permanent Secretary in the Department of Housing and Communities. By early afternoon, two more junior ministers had resigned.

In a speech on Monday aimed at boosting support among his Labor colleagues, Mr Starmer took responsibility for the party’s dismal performance in last week’s local council elections. The result is seen as a litmus test of public support for Labor, and he admitted he had “doubts”.

He also vowed to “take on the big challenges” facing the country and focus on national security, immigration and building closer ties with Europe. However, the speech did not impress party insiders, and several cabinet aides resigned late on Monday.

Analysts at Eurasia Group said: “Mr Starmer’s attempts to quell the rebellion against his leadership have failed.”

“He may remain in Downing Street for a few more months, but he is still fighting for his political life after his make-or-break speech early on Monday did not include enough new policies to satisfy many Labor MPs,” they said.

Jordan Rochester, head of EMEA fixed income, currencies and products strategy at Mizuho, ​​commented on Tuesday that momentum was not on Starmer’s side.

“For many people, the outcome is decided at this stage. It’s just a matter of how quickly Brexit happens…[yet]if Starmer leaves, it will be history. No sitting Labor prime minister has ever faced a leadership challenge or been sacked from his party,” he said.

British government borrowing costs rose to their highest level since 2008 on Tuesday morning, a sign of market anxiety over the volatile political situation.

For some time there have been whispers of dissatisfaction among Labor MPs and large sections of the electorate. Of particular concern is the government’s apparent failure to contain illegal immigration, particularly by boat crossing the English Channel, and its unpopular efforts to cut welfare spending.

A series of policy shifts characterized the Labor government as weak and indecisive, and reliant on influential backbenchers. This also damaged the company’s credibility among investors.

Mr Starmer’s latest political crisis was triggered by Labour’s dismal performance in last week’s local council elections, with voters flocking to both the right-wing Reform UK Party and the left-wing Green Party. In total, Labor lost control of more than 30 parliaments across England, with around 1,500 MPs defeated.

Mr Starmer held a tense meeting with government officials on Tuesday morning, at the same time his office issued a statement insisting he had no intention of resigning to the prime minister.

“The Labor Party has a process for challenging leaders, but it has not been triggered,” the statement said.

“The country expects us to continue to govern. That’s what I’m doing and what we have to do as a cabinet. The past 48 hours have destabilized our government, and it has caused real economic damage to our country and its families.”

Despite Mr Starmer’s defiance, the Prime Minister’s leadership team was reportedly divided over what he should do next, with both the BBC and the Financial Times reporting mixed messages from ministers on Monday night, with some urging him to keep fighting and others saying he should consider stepping down. The Telegraph reported on Tuesday that six of the 22 cabinet members are expected to ask him to resign.

Political analysts say Starmer’s time as prime minister is coming to an end, but questions remain about when and how he will step down. Eurasia Group on Monday night raised the probability that Mr Starmer will be sacked this year from 65% to 80%. Conversely, there is currently only a 20% chance that Starmer will remain prime minister.

“The most likely scenario is that MPs force a leadership election by September (35% chance); a 25% chance of an orderly transition with Mr Starmer agreeing to step down; and a 20% chance of an immediate leadership election,” analysts at Mujtaba Rahman’s Eurasia Group said in an emailed analysis on Monday.

British media on Tuesday predicted Mr Starmer’s imminent downfall, highlighting his failure to persuade critics that he should remain in office. Candidates to replace him are attracting both media and market attention.

A possible candidate for the leadership position is Andy Burnham, the mayor of Manchester, but he would need to become an MP to stand in the leadership race. Mr Starmer’s former deputy Angela Rainer and current health secretary Wes Street are also thought to be potential candidates. But so far, no one has made any moves to challenge Starmer.

Economists warn that any candidate could loosen the purse strings while in office, reversing efforts to rein in spending and debt. This could send a shockwave through the market and scare away investors already concerned about Britain’s struggle to rein in inflation and boost growth.

Deutsche Bank strategists said on Tuesday that Britain’s 10-year and 30-year borrowing cost rates rose to 5% and 5.67% respectively on Monday, reflecting market concerns that the new Labor leader “could face pressure to ease fiscal rules and increase gold printing.”

Tuesday’s cabinet meeting “could be a key day in determining Mr Starmer’s future,” they added in an emailed comment.