Borrowing costs rise as Starmer’s reset fails to quell rebels
Borrowing costs rise as Starmer’s reset fails to quell rebels
Chris PriceMon, May 11, 2026 at 4:36 PM UTC
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Sir Keir Starmer arriving ahead of his speech, in which he pledged to move Britain closer to the EU and to nationalise British Steel - PA
UK borrowing costs have jumped as pressure mounts on Sir Keir Starmer to step down.
The yield on gilts, as UK government bonds are known, rose at one of the fastest paces in Europe after the Prime Minister’s “reset” speech failed to quell backbench rebels.
The interest rate paid by the Treasury to borrow over 30 years climbed by 0.09 percentage points on Monday to 5.67pc.
By comparison, bond yields in France, Germany, Spain and Portugal were all up less than 0.02 percentage points.
UK borrowing costs rose sharply as Labour MP Catherine West urged Starmer to step down and Lisa Nandy, the culture secretary, hinted at a Cabinet split over Starmer’s future.
The Prime Minister has been left fighting to save his premiership after the party’s local election bloodbath last week.
Michael Every, an analyst at Rabobank, said the sharper rise in UK borrowing costs was driven by concerns about political instability.
Mr Every said: “Financial markets will be worried about populist left policy direction under new leadership, where Labour is losing voters just as fast as it is to the populist right.”
Yields on 10-year bonds - the benchmark for UK government borrowing costs - surged by 0.08 percentage points to just shy of 5pc.
Bond yields rose globally in part because of higher oil prices. Brent crude rose by more than 2pc to $104 per barrel after Donald Trump rejected Iran’s response to US peace proposals.
Despite the political instability, the FTSE 100 rose 0.42pc as energy stocks climbed.
05:36pm
Signing off...
That’s all from us today. You can read all our latest business and economics news here. Have a lovely evening.
05:24pm
Tech and finance bosses on China delegation
Blackrock chief executive Larry Fink and Apple boss Tim Cook will be among the fleet of business leaders joining Donald Trump’s delegation to China this week.
More than a dozen top US executives will join Mr Trump on his trip to meet President Xi Jinping in Beijing, in what will be the first visit by a US president in nearly a decade.
The list of executives travelling with the US delegation also includes Blackstone chief executive Stephen Schwarzman, Boeing boss Kelly Ortberg, and David Solomon, the head of Goldman Sachs, according to Reuters.
Tesla chief executive Elon Musk, who was the biggest donor to Mr Trump’s presidential campaign and briefly helmed his government purge, will also be attending.
04:28pm
Trump says he will cut US petrol tax
Donald Trump says he will scrap federal tax on petrol as he scrambles to shield US consumers from rising prices as a result of the war in Iran.
The US president told CBS news that he plans to suspend federal excise taxes on petrol and diesel “for a period of time” until “gas goes down”.
The tax is worth 18.4 cents (13p) per gallon of petrol and 24.4 cents per gallon of diesel.
However, Mr Trump does not have the power to suspend this tax himself. Doing so would require an act of Congress.
Mr Trump said: “We’re going to take off the gas tax for a period of time, and when gas goes down, we’ll let it phase back in.”
Pump prices have soared by more than 50pc since the war in Iran began, driving petrol prices to $4.52 per gallon - far above the critical $4 threshold that typically pushes drivers to change their habits.
These cost pressures are increasingly becoming a big political problem for Mr Trump, who is seeing his popularity slump in the polls ahead of mid-term elections in November.
The share of Americans who approve of the President has plunged from 51.6pc at his inauguration to a second-term low of 37.6pc, according to the Silver Bulletin.
04:06pm
US home sales flatline
US homes sales are flatlining as high borrowing costs depress buyer demand, new data shows.
Existing home sales rose by just 0.2pc month-on-month to an annualised rate of 4.02 million in April and were unchanged from a year earlier, according to the National Association of Realtors.
This was below the 4.05 million rate economists were expecting and means transactions are on track for another 30-year low this year.
High mortgage rates and squeezed affordability in the wake of the pandemic mean annualised housing transactions have been close to 4 million since 2023, far below the historic norm of 5.2m million.
Bradley Saunders, of Capital Economics, said transactions could fall next month as the war in Iran drives mortgage rates back up again.
Mr Saunders said: If anything, a virtually unchanged reading was about the best that could have been hoped for given the roughly 50bp jump in mortgage rates in March.
“Since closings tend to lag agreements by a couple of months, there is reason to expect sales to slide this month.”
03:28pm
‘No sign of panic’ on bond markets
Rupert Thompson, chief economist at asset manager IBOSS, insisted there was “no sign of panic” despite the recent surge in government borrowing costs.
He said: Over the past couple of weeks, 10-year UK gilt yields have been testing the high of 5pc touched temporarily in March.
“Fears of rate hikes, along with the risk of a looser fiscal policy if Starmer were to be replaced, have been behind the rise.
“Still, despite the occasional headline suggesting as much, there is no sign of panic – gilt yields actually ended last week slightly lower and the pound was unchanged.
“UK equities have been disappointing suffering from a lack of tech stocks, which have led the equity rebound, and an excessive exposure to defensive sectors such as consumer staples and healthcare which have been underperforming.”
02:48pm
Burnham policies ‘risk repeat of 2022 mini-Budget’
Andy Burnham’s economic policies risk a repeat of the 2022 turmoil after Liz Truss’s mini-Budget, an investment bank has warned.
The Mayor of Greater Manchester would seek to undo the free-market reforms of Nigel Lawson in the 1980s which led to the privatisation of many state-owned industries, according to Panmure Liberum.
Chief UK economist Simon French said a push away from private ownership in important markets such as energy, housing, and transport risked pushing up borrowing costs.
Mr Burnham lacks a political mandate from the electorate, he said, and faces questions over whether public ownership of services would improve efficiency. Mr French also suggested the bigger issues facing the economy “frictions of planning regulation, a range of energy moratoria, capital market derisking, and political choices”.
He said: “Without addressing these issues head-on, it is hard to see how Burnhamism survives contact with economic reality, and the bond market.”
He added: “The Labour Party appear keen to embrace a different economic model to the one they pitched to the electorate in 2024 and have attempted since.
“Any such attempt risks having political parallels with the 2022 Mini Budget, but also more fundamental economic challenges of being underpinned by a belief that the UK’s stubbornly low growth in living standards has been a function of ownership, and control.”
Andy Burnham is favoured by many MPs as a successor to Sir Keir Starmer - Ryan Jenkinson/Getty Images
02:41pm
US stocks fall at the open
Wall Street’s main indexes opened lower after Donald Trump rejected Iran’s response to a US peace proposal for the Middle East.
After last week’s record-setting rally, the Dow Jones Industrial Average opened down 60.1 points, or 0.1pc, to 49,549.07.
The S&P 500 fell 13.6 points, or 0.2pc, at the open to 7,385.31, while the Nasdaq Composite dropped 111.4 points, or 0.4pc, to 26,135.63.
02:21pm
Iran war stalemate adds to pressure on UK debt costs
Along with the turmoil surrounding Sir Keir Starmer, the cost of government borrowing has been pushed up by the stalemate in the Middle East.
Donald Trump roundly rejected Iran’s response to the US peace proposal, pushing up the price of oil and gas.
Brent crude, the international oil benchmark, was last up 2pc above $103 a barrel, while European wholesale gas prices have climbed as much as 4.4pc.
Higher energy prices risk pushing up inflation, which erodes the returns offered to buyers of government debt. This leads them to demand higher returns, pushing up the cost of government borrowing.
Mr Trump wrote in a social media post that Iran’s response on Sunday to the US’s latest proposal was “TOTALLY UNACCEPTABLE!”
02:00pm
Borrowing costs rise above 5pc
UK borrowing costs have continued their march higher as Sir Keir Starmer faces increasing pressure to resign.
The yield on 10-year gilts, a benchmark for the cost of Treasury borrowing, has jumped 0.09 percentage points today to hit 5pc.
01:36pm
Markets expected challenge from ‘higher ranking people’
While borrowing costs have risen, the move has been less severe than many feared because there has not been an immediate challenge to Sir Keir Starmer, a fund manager has said.
Neil Birrell of Premier Miton said traders were still pricing in the possibility that the Prime Minister could be replaced by a more “market friendly” candidate such as Wes Streeting.
He added that that borrowing costs also had less room to move higher after the local elections because they had climbed so much in the lead up to voting day.
He said: “Other than Rayner coming out and saying what she said, I think there has been less pressure on Starmer as a result of this election than people were expecting.
“I think there was a a big assumption that there’d be maybe an immediate and a very strong challenge from higher ranking people within the party than we’ve seen.
“And therefore I think there might be just an element that, well, it’s not as bad as we thought it could be for us.
“It does seem like Streeting is probably, you know, there is going to be a replacement that markets [would] be more in favour of.
“It seems it’s not just going to be a Left-wing move. It’s going to be something who has more policies that are more acceptable to the markets, I think.”
01:05pm
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In this morning’s To Business newsletter, Christopher Williams reveals why the fall of Sir Keir Starmer, and the Government lurching to the Left, could quickly make Britain’s fiscal position untenable.
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12:42pm
Rayner says Labour wrong to block Burnham from standing as MP
Angela Rayner has said it was a mistake to block Andy Burnham from returning to Parliament as an MP as she addressed trade unionists.
The former deputy prime minister said Labour needed to be a working people’s party and said it was no good acknowledging mistakes if no-one did anything to put them right.
She said tweaks would not fix the challenges faced by the UK, adding Labour mist reject factionalism and unite its movement if it is to win back voters.
Mr Burnham, the Mayor of Greater Manchester, was last year blocked from standing in a by-election by Labour’s National Executive Committee.
Angela Rayner has given a speech at the CWU conference in Bournemouth - Sky News
12:28pm
West urges Starmer to set timetable for exit
Catherine West, the backbench MP, has urged Sir Keir Starmer to hold a leadership contest by September.
In a statement, she said: “I have listened to the Prime Minister’s speech this morning. I welcome the renewed energy and ideas. However, I have reluctantly concluded that this morning’s speech was too little too late.
“The results last Thursday show that the prime minister has failed to inspire hope. What is best for the party and country now is for an orderly transition.
“I am hereby giving notice to No 10 that I am collecting names of Labour MPs to call on the prime minister to set a timetable for the election of a new leader in September.
“I want to thank everyone who has been in contact over the weekend to offer good wishes. We need our best top team in place to fight the next election. We owe working people up and down the country nothing less.”
12:24pm
‘Starmer must go’
Labour has never understood the link between spending and private sector growth, Telegraph readers have said, as some called for the Prime Minister to quit.
Here are some views from the comments section below, and you can join the debate here.
12:01pm
Borrowing costs rise as West to launch bid to oust Starmer
The cost of government borrowing ticked higher as Labour backbencher Catherine West reportedly said she would press ahead with plans to oust the Prime Minister.
Ms West will urge colleagues to vote for a leadership contest, although she said she did not want to be leader herself, according to Sky News.
She threatened to launch a leadership challenge over the weekend but said she would wait to see the outcome of Sir Keir Starmer’s speech.
The yield on 30-year gilts was last up 0.08 percentage points to 5.66pc. By contrast, the long-term borrowing costs of France, Germany, Spain and Portugal were all up less than 0.02 percentage points.
11:44am
Unions back Starmer’s plans to nationalise British Steel
Sir Keir Starmer secured the backing of two major unions after vowing the nationalise British Steel.
Community general secretary Roy Rickhuss and Unite general secretary Sharon Graham said they both “fully support” the Prime Minister’s plans to fully bring the steelworks into public ownership.
In a joint statement, they said: “The government taking control of British Steel last year was a historic and unprecedented intervention which saved thousands of jobs and steelmaking at Scunthorpe.
“To deliver the investment needed for a secure future, the ownership of the British Steel must now be resolved. That’s why nationalising the business at this stage is absolutely vital.
“We fully support this decisive step. British Steel has a bright future, with a world class highly skilled workforce making strategically important steels for the UK’s rail and infrastructure.
“The business also has the potential to expand and become a vital part of the supply chain for other UK steel sites.
“Today the Government has demonstrated that it is prepared to act to secure vital steel assets by bringing them into public ownership, and ministers may need to deploy these new powers in connection with other industrial situations going forward.
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“The Government must also take actions to ensure that all government-funded projects use UK Steel.”
11:18am
Markets fear new Labour leader ‘would increase government borrowing’
Bond market traders are concerned a new Labour leader would loosen the public purse strings and push up borrowing, an investment manager has said.
Oliver Faizallah, head of fixed income research at Charles Stanley, said: “UK bond markets remained at the centre of investor attention following early results from the UK’s local council elections, which delivered heavy losses for the ruling Labour Party and renewed questions about Prime Minister Keir Starmer’s political authority.
“In the weeks leading up to the results, long-end gilt yields reached multi‑decade highs as markets continued to demand a higher term premium to compensate for the persistent risk of leadership challenge.
“Markets are concerned a new Labour government could result in looser fiscal rules and increased government borrowing.
“While the Labour Party suffered heavy losses, results were broadly anticipated by markets. Political anxiety eased modestly once Starmer publicly ruled out resignation, prompting a small rally across the gilt curve, with 10‑year yields edging lower and longer‑dated bonds outperforming on the day.
“The reaction underlined how sensitively UK debt is trading to political signals, rather than to near‑term economic data alone.”
11:09am
Borrowing costs rise as Burnham becomes favourite to replace Starmer
The cost of government borrowing edged higher as Andy Burnham became the favourite to replace Sir Keir Starmer after the Prime Minister’s speech.
The yield on 30-year gilts, which hit its highest level since 1998 last week, rose 0.07 percentage points to 5.65pc.
It came as Mr Burnham became the new 2/1 favourite to become the next Prime Minister, surpassing former deputy leader Angela Rayner, according to William Hill.
Long-term borrowing costs have been hit hard by bets that Sir Keir will be replaced by a more Left-leaning Labour leader, who would be expected to push up spending and borrowing.
10:53am
Starmer accused of missing message after Reform victories
Laurence Hulse, a fund manager and founder of Onward Opportunities, accused Sir Keir Starmer of having the wrong message after Labour was trounced by Reform in the local elections last week.
During his speech, the Prime Minister set out plans to deliver “an ambitious youth experience scheme” with the EU.
He said the proposal would mean “our young people can work and study and live in Europe, a symbol of a stronger relationship and a fairer future with our closest allies”.
Mr Hulse was withering in his response.
10:47am
Pound down after Starmer speech
The value of the pound remained lower despite Sir Keir Starmer’s attempt to reassert his authority as Prime Minister.
Sterling was down 0.2pc against the dollar at $1.36 and fell 0.1pc versus the euro to €1.156.
10:44am
Starmer announces ‘no concrete actions’
A former policymaker at the Bank of England said Sir Keir Starmer had announced “no concrete actions and policies”.
Andrew Sentance, a member of the Monetary Policy Committee from 2006 to 2011, added: “None of those rumoured to be in the frame to replace him have any better plans and policies either!”
10:41am
Starmer attacks Farage over Brexit
Nigel Farage does not want to talk about Brexit because it did not deliver for working people, Sir Keir Starmer has said.
Defending his plan to push Britain closer to Europe, the Prime Minister said: “The one thing that he delivered for the country, Brexit, he doesn’t want to talk about that.
“There’s a reason for that. It didn’t help working people. It turned out what he said wasn’t true and that’s why he doesn’t want to talk about it now. But we have to talk about it now because we have to address the situation we’re in.”
10:38am
Starmer proposes ‘reactionary policies’
Kallum Pickering, chief economist at stockbroker Peel Hunt, said the Prime Minister’s plan to nationalise British Steel was “backward”.
10:34am
Starmer insists Burnham doing ‘great job’ in Manchester
Sir Keir Starmer has finished his speech and is now taking questions from the press.
Asked if what he had said was enough as Labour MPs consider whether to oust him, he said he was setting out the “direction that we need to take”.
The Prime Minister said the Government needed to deliver a “bigger response” than when Labour was elected in 2024.
He also said he worked well with Andy Burnham, who he said was doing a “great job” as Mayor of Greater Manchester.
He said a decision on whether he would be allowed to run as an MP would be down to Labour’s National Executive Committee.
Mr Burnham is considered the leading candidate from the Left of the Labour party who could mount a leadership challenge.
10:30am
Young people to be guaranteed work offer, says Starmer
The Prime Minister has pledged to offer people a guaranteed work offer as he said he was entering a “battle for the soul of our nation”.
“We cannot win as a weaker version of Reform or the Greens,” he said. “We can only win as a stronger version of Labour.”
10:27am
Borrowing costs remain higher during Starmer speech
The cost of government borrowing was still up at the steepest pace in Europe despite Sir Keir Starmer’s efforts to put his leadership back on track.
The benchmark 10-year UK bond yield was up 0.04 percentage points to 4.95pc.
10:25am
Starmer pledges to rebuild ties with Europe
The Prime Minister said he would set out a new direction for Britain at the next EU summit as he hinted at closer realignment with the bloc.
Sir Keir Starmer said Brexit had made Britain weaker and ramped up immigration.
He said his Labour Government would be defined by putting Britain at the “heart of Europe”.
10:23am
British Steel to be nationalised
Sir Keir Starmer has said British Steel will be fully nationalised under his plans to revive his premiership.
The Prime Minister said he would bring forward legislation to take full ownership of British Steel.
You can follow updates on the political implications of his speech here.
10:20am
‘Status quo failed people time and again’
The Prime Minister said Britain had got too wrapped up in trying to return the country to the status quo after years of crises.
He pointed to the global financial crisis, Brexit, the Ukraine war, the Iran conflict, saying the economy “has been buffeted by crisis after crisis”.
He said Britain was striving to get people back to “a status quote that failed working people time and again”.
10:17am
Starmer: Life has been hard through decades of crisis
Sir Keir Starmer insisted the fundamentals of the economy are “sound” but acknowledged change could not come quickly enough for many people.
He said some voters do not believe he can deliver the change needed.
“I can see how hard life has been through these decades of crisis,” he said.
He said there are millions of people do not get the chance they deserve to go “as far as their talent will take them”.
10:14am
Starmer: I know I have my doubters
The Prime Minister acknowledged voters are frustrated with him.
Sir Keir Starmer said: “I know I have my doubters and I know I have to prove them wrong and I will.”
He said he is “battling Reform and the Greens” and said neither Nigel Farage or Zack Polanski offer serious leadership these times demand.
10:11am
Starmer warns of ‘very dangerous opponents’
Sir Keir Starmer has taken to the stage in central London after being introduced by Labour MP Jade Botterill.
The Prime Minister said Britain is facing “very dangerous opponents” and could go down a “very dark path” after last week’s local election results.
He said he takes responsibility for navigating Britain through these times and he would not walk away and plunge the country “into chaos”.
10:07am
Starmer enters room before key speech
Sir Keir Starmer is in the room ahead of his make-or-break speech after last week’s poor local election results.
A quick glance at the market before he speaks shows the pound down a touch against the dollar and euro, while the yield on 10-year gilts stands at 4.96pc.
09:52am
Borrowing costs lower as Labour ‘leans towards waiting for Burnham’
The cost of government borrowing has not risen at a more rapid pace as traders expect Labour MPs to wait for the return to Parliament of Andy Burnham before launching a coup.
Jordan Rochester, executive director at Mizuho Bank, also said bond markets are not yet fully reflecting the chances of Sir Keir Starmer being replaced.
He said many traders would be looking at Polymarket, the prediction market platform, which puts the odds of the Prime Minister hanging on until the end of the year at 35pc.
He said: “If a leadership contest is triggered now, before Burnham has a chance to run as an MP, it opens the door to weaker candidates such as Miliband, Streeting, Carns or Rayner.
“Each with a set of weaknesses that makes the party lean more towards waiting for Burnham in my view.”
UK borrowing costs fell after the last week’s local election results, a move which Mr Rochester said did not make sense.
He added: “It looked like ‘buy the rumour, sell the fact’ after the local election results with Starmer not instantly resigning (not sure who would have expected that anyway).”
09:33am
Rise in borrowing costs ‘relatively inconsequential’
James Athey, a fund manager at Marlborough, said the rise in gilt yields had been “relatively inconsequential” in the lead up to Sir Keir Starmer’s speech.
He said: “With the news over the weekend that the Labour leadership challengers may finally have their stalking horse, it’s not too surprising to see gilt yields higher on the open.
“The move, however, is relatively inconsequential at this early stage because the MP in question appears to be nowhere near to having the required 81 signatures.
“Indeed, with Angela Rayner now appearing to back Burnham, as yet still not a member of parliament, the likelihood of a successful near-term challenge resulting in an obvious leftward shift still looks lower than investors may have feared a few weeks ago.
“I struggle to see what Starmer could say in his speech at 10am today which will put any of these questions to bed, but of course we will all be watching closely to see if he attempts to head off these challenges with concrete policy proposals.
“The short history of his premiership suggests that such an outcome is highly unlikely. If that scepticism turns out to be justified then unfortunately gilt yields will continue to be at the mercy of domestic and international headlines.”
09:28am
Good morning
Thanks for joining me. UK borrowing costs have risen at the fastest pace in Europe as Sir Keir Starmer prepares to deliver a speech aimed at saving his premiership. Here is what you .
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What has happened so far
The FTSE 100 edged higher after Donald Trump rejected Iran’s proposal to end the Middle East conflict.
The UK’s flagship index was higher as oil and gas stocks were boosted by the US president’s comments, which pushed up oil prices.
European shares mainly fell, with the Cac 40 in France down 0.7pc and the Dax in Germany down 0.1pc.
Mr Trump rejected Iran’s response to a US peace proposal, calling it “totally unacceptable.” Tehran proposed ending the war on all fronts, including Lebanon, along with compensation for war damage and claimed sovereignty over the Strait of Hormuz, Iranian state TV said.
Tokyo’s Nikkei 225 fell 0.4pc to 62,486.84 after briefing reaching another record high in intraday trading at above 63,300. Technology-focused investment holding company SoftBank Group, one of Japan’s largest stocks, fell more than 5pc.
South Korea’s Kospi gained 4.1pc to 7,804.71. It also hit an all-time intra-day high, led by gains from tech-related stocks including Samsung and memory chip maker SK Hynix.
Technology-related stocks and growing artificial intelligence-related interest have supported markets in Japan and South Korea despite the Iran war, with the Nikkei 225 and Kospi rising more than 10pc and 30pc, respectively, over the past month.
Hong Kong’s Hang Seng fell 0.3pc to 26,319.93. The Shanghai Composite index climbed 0.9pc to 4,219.13, following official data Monday that showed China’s factory gate prices rose 2.8pc in April from a year ago, the highest since 2022, as well as better-than-expected export figures released over the weekend.
Australia’s S&P/ASX 200 lost 0.6pc. Taiwan’s Taiex traded 0.9pc higher, and India’s Sensex fell 1.3pc.
Source: “AOL Money”
