‘Rayner or Burnham would be a disaster’, says ex-Pizza Express boss: Business leaders fear lurch to the Left
As Sir Keir Starmer’s rivals circle, business leaders are alarmed by a damaging surge on the anti-growth left.
Bosses fear that if Angela Rayner, Andy Burnham or Ed Miliband replace him, they will increase taxes and borrowing, putting further pressure on firms and households, as well as the public finances.
As Sir Keir continues to hold on, the Barclays boss becomes the latest bank chief to plead for ‘stability’ amid turmoil at Westminster.
Former Pizza Express boss Hugh Osmond said there was ‘clearly’ concern that a left-wing change could have detrimental consequences.
Mr Osmond said Health Secretary Wes Streeting, a potential candidate, ‘could be an improvement’ but added: ‘Rayner or Burnham would be a disaster.’
Sir Martin Sorrell, CEO of marketing firm S4 Capital, said there was a ‘possibility’ of a leftward lurch that could shake the markets.
“I don’t think bond lawmakers would like or tolerate that,” he said, referring to traders targeting countries with seemingly weak public finances.
Business fears dangerous shift to the left if Angela Rayner replaces Keir Starmer
Economists fear markets would react negatively to such a move, leading to a sell-off of British government bonds (known as gilt bonds), which would increase the cost of borrowing.
Banks are also worried; Barclays chief executive CS Venkatakrishnan, known as Venkat, yesterday called for a focus on growth, echoing comments made a day earlier by Natwest boss Paul Thwaite.
Asked what he would say to Labor MPs planning to replace the Prime Minister, Venkat said: ‘The growth of the country is really important.
‘What we want to see for businesses, financial markets and the financial industry is stability and predictability. These are the things that drive long-term growth and productivity that we look for in the short and medium term.’
The comments came after gilt markets and Sterling were rocked on Monday by the collapse of Sir Keir’s position at the weekend.
Markets later stabilized as the Prime Minister’s cabinet gave him public support, but experts fear there could be further turbulence as disastrous local elections loom in May and speculation over the Labor Party leadership continues.
Simon French, chief economist at City investment bank Panmure Liberum, said: ‘We think one possible outcome is for Labor’s left-wing faction to bring about a successful change in the party’s leadership.’
This will result in ‘an increase in public sector borrowing, lower growth and higher growth’. inflation‘.
Mr French said a takeover by Ms Rayner or Mr Miliband could push ten-year borrowing costs above 5 per cent.
Small movements in these borrowing costs or gilt yields, if sustained, could add billions of dollars to the cost of financing public spending.
On Monday, ten-year gold yields rose sharply above 4.6 percent, but as of yesterday they had stabilized around 4.5 percent. The UK’s borrowing costs are currently the highest among the G7 group of developed countries. But they have not risen to 5 percent since the global financial crisis in 2008.
Mr Miliband got a taste of the possible shift to the left that would come if he took over when he told Sky News yesterday: ‘For too long this country has been run by the rich and powerful and that needs to change.’
Asked if this had changed under the current Labor government, he said ‘not enough’ and hinted the party could redouble its attacks on wealth creators, who have already seen entrepreneurs flee the country.
Modupe Adegbembo and Mohit Kumar, economists at investment bank Jefferies, said there could be a ‘sudden rise’ in gold yields if a left-wing rival emerges and further weakness in sterling and volatility in the UK stock market increases.
In a note to clients they said: ‘Even without a formal leadership struggle, instability is already weakening sentiment and reducing policy clarity.’
Neil Wilson, British investment strategist at Saxo Bank, said the upcoming Gorton and Denton by-election ‘could usher in another period of volatility’.
The leadership turmoil threatens to worsen the dismal economic performance already seen under the current government, with unemployment rising, growth slowing and inflation at the highest level in the G7.
Ruth Curtice, boss of the Resolution Foundation, Labour’s favorite think tank, said that although the riot in Westminster seemed remote from ordinary people’s lives, the party’s economic failure was likely contributing to the turbulence.
‘Maybe there really is a connection,’ he said. ‘The loss of trust in politics and politicians is ultimately not just about the behavior of some of those in power.
‘This is due to a combination of abuses by some and the failure of the system as a whole to make progress. ‘Britain is not a comfortable nation.’
DIY INVESTMENT PLATFORMS
A.J. Bell
A.J. Bell
Easy investment and ready portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund trading and investment ideas
interactive investor
interactive investor
Fixed fee investment from £4.99 per month
free trade
free trade
Investing in Isa is now free on the basic plan
Trade 212
Trade 212
Free share sales and no account fees
Affiliate links: If you publish a product, This is Money may earn a commission. These deals are chosen by our editorial team because we think they’re worth highlighting. This does not affect our editorial independence.
