What would a new PM mean for the UK economy and markets?

With Starmer’s premiership looking on the precipice, we are resending this analysis we published on Friday 8th May that highlights the main policies of his potential replacements and what they might mean for the economy and the financial markets. In short, a shift to the political left is likely to lead to looser fiscal policy, higher gilt yields and a lower pound than otherwise, but we doubt a new Prime Minister would be any more successful at boosting the economy’s medium-term growth rate. With 10-year gilt yields up by 10bps this morning and the pound down by 0.4% against the euro, which comes after similar moves yesterday, this is already playing out in the financial markets.