Yield curve likely to steepen as the UK changes prime minister again
The UK is set for a leadership change, with Andy Burnham likely stepping in. Key economic challenges await, impacting fiscal policy and market strategies.
Keir Starmer’s resignation means the UK will have a new Prime Minister by September at the latest, with Andy Burnham the clear favourite.
Given the UK’s poor fiscal position, perceptions that Burnham might pursue looser fiscal policy, and fading short-end pressures, we expect the yield curve to steepen in the next few months.
We’re sceptical a new leader will have time to develop a detailed policy platform ready to implement in the autumn budget, particularly given a change of chancellor also looks likely. So we don’t plan any major changes to our baseline forecast in July.
We think these developments back our view that the pre-election tightening embedded in the government’s current fiscal plans will be watered down.
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