King Charles sets out fragile government’s agenda amid gilt sell-off
King of England III. Charles will set the agenda for the fragile UK government on Wednesday after Prime Minister Keir Starmer faced calls to resign in the previous session, leading to heavy selling pressure on Gilts.
The State Opening of Parliament and the King’s Speech, a major event where the monarch presents the government’s legislative agenda for the next parliamentary term, comes at a time when Starmer’s political leadership is under threat from the political fallout from the ruling Labor Party’s poor performance in last week’s local elections.
Starmer appears to have avoided any immediate leadership challenges for now and is hoping today’s pomp and show can distract from the current crisis.
This does not mean that the leadership threat has disappeared. Ahead of King’s speech to the House of Lords on Wednesday morning, Starmer held a brief meeting: reportedly lasts only 17 minuteswith Wes Streeting, one of his main leadership rivals.
Streeting, Britain’s health minister, reportedly wanted to meet Starmer privately on Tuesday but was rejected. It followed a tough cabinet meeting in which Starmer vowed to continue leading Labor despite more than 80 MPs calling on the Prime Minister to resign.
The markets have spoken
Markets had a say in the political crisis in England, which has seen four prime ministers in the last four years; return UK government bonds, known as gilts, saw double-digit gains on Tuesday as investors feared any leadership by Starmer would lead to a loosening of fiscal discipline imposed by Chancellor Rachel Reeves.
On Wednesday, yields fell 2 to 6 basis points as Starmer’s incumbent position appeared safer, with the benchmark 10-year interest rate hovering around 5.067%.
Britain needs to start becoming “a little more adult,” Jim O’Neill, the former head of Goldman Sachs Asset Management and former U.K. treasury secretary, told CNBC on Wednesday.
“It shocks me that voters treat the country’s leadership like some kind of game show where you spend a few months of the year and if we don’t like you, you’re out, as evidenced by the scale of support for Reform in the council elections,” he told CNBC’s “Squawk Box Europe.”
“It doesn’t seem to me that any of these voters are worried about the lack of growth or stability of the financial markets… And the idea that a constitutionally ambitious person could come in and replace the current Prime Minister… I think that’s a really dangerous thing, given the fragility of our current electoral situation,” he added.
Saxo UK investor strategist Neil Wilson said today’s King’s Speech could offer Starmer a reprieve but not a stay of execution.
“The King’s Speech may see a pause in the plot, but bond markets are clearly on edge and I wouldn’t be surprised if Cabinet resignations start after the King finishes his speech or tomorrow morning.”
“Labor unions are calling on Starmer not to lead the party at the next election. The Prime Minister has had a meeting with Wes Streeting, one of the leading leadership candidates. As of posting time, no-one yet has the numbers to challenge Starmer,” he said in emailed comments.
The Prime Minister appeared to challenge potential rivals on Tuesday, but so far none have been made public. Support for the Prime Minister also emerged; As of Wednesday morning, 93 Labor MPs had called for Starmer to resign, but 158 said they supported him remaining as leader.
Starmer’s saving grace is that, although a significant majority of Labor MPs agree they want a new party leader and Prime Minister, there is no general agreement on who they want to replace him; Some back Streeting, while others support former Deputy Chancellor Angela Rayner, who must become an MP before mounting a leadership challenge, or Manchester Mayor Andy Burnham.
Everyone is smiling: British Prime Minister Keir Starmer, British Chancellor of the Exchequer Rachel Reeves (L) and British Health Secretary Wes Streeting (C), July 3, 2025.
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The King’s Speech
In the King’s Speech, the monarch is expected to present to parliament an outline of the government’s agenda for the coming year.
The address is being written by the government rather than the monarch, giving Downing Street the opportunity to reset the political narrative at a time this year when voters are voicing their dissatisfaction with the slow pace of change and developments in the UK.
While high inflation and declining economic growth linked to the Iran and Ukraine wars were largely beyond the government’s control, the Labor leadership came under criticism for their failure to contain pressing domestic issues, particularly illegal immigration and cost of living pressures.
Many of his colleagues’ growing political dissatisfaction with Starmer and his narrow escape from an immediate leadership challenge are giving the government impetus to revamp its legislative agenda.
The government said during the King’s Speech that the monarch would set out an “ambitious programme” to “strengthen public services, reform the state and reverse the decline”.
King Charles III, wearing the Imperial State Crown and State Robe, reads the King’s Speech from the Sovereign’s Throne next to Queen Camilla, wearing the George IV State Diadem, in the House of Lords chamber at the Houses of Parliament on July 17, 2024 in London, England.
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“A stronger, fairer country that can weather the storm of global shocks and restore hope will be the focus of new legislation set out in the King’s Speech today,” the government said in a statement ahead of the speech, which will take place at around 11.30am London time. he said.
The speech will unveil more than 35 bills and draft laws designed to strengthen the UK’s foundations through measures to improve the economy, energy and national security, as well as strengthen the country’s relationship with the European Union.
