Financial markets took a downturn after Andy Burnham sacked Rachel Reeves as chancellor in a sweeping Cabinet reshuffle on his first day as Prime Minister. The FTSE 100 finished 0.71% lower at 10,524.76 points, while the yield on 10-year government bonds rose eight basis points to 5.049%, the highest in two months. The pound slipped 0.29% against the US dollar to 1.341.
Cabinet Shakeup Sparks Uncertainty
Mr Burnham formally became PM today and launched a major Cabinet shakeup, axing Ms Reeves alongside David Lammy, Steve Reed, and Lord Hermer. He appointed John Healey as the new Chancellor, a surprise move after speculation that Shabana Mahmood and Ed Miliband were frontrunners.
Investors were left uncertain about Mr Burnham's economic policy direction. Despite his claims that new spending plans would be fully funded and that he would "stick to the fiscal rules," he added that he would use "any flexibility" within existing rules, which spooked markets.
Market Reaction and Borrowing Costs
The yield on 10-year gilts moved eight basis points higher to 5.049% at the end of London trading, bringing the cost of UK state borrowing to its highest level for around two months. The pound, which had been positive for most of the day, slipped by 0.29% to 1.341 against the US dollar.
Burnham's First Speech as PM
In his first speech as Prime Minister, Mr Burnham promised a period of "reflection and new resolution." He said, "Britain needs to show the world that we can regain our stability once again." He continued, "I know people at home are fed up with politics. I hear you and I want to be honest with you - we have not been good enough, and we need to be better. We will be."
He added, "We will make this moment a circuit breaker for Britain, bringing forward the biggest changes in the last 40 years - a new political model and a new economic model." Mr Burnham suggested this would involve putting "life's essentials back under public control to make them affordable" and using public spending to back British businesses. He said he would lay out a 10-year plan later this year and provide more immediate support to households struggling with rising costs.
