Why the Epstein furor could be about to bring down the UK government
British Prime Minister Keir Starmer (R) speaks with then-US ambassador Peter Mandelson during a welcome reception at the ambassador’s residence in Washington, DC, on February 26, 2025.
Carl Court | Getty Images News | Getty Images
The release of more Epstein files last week triggered a chain of events that left UK Prime Minister Keir Starmer fighting for his political life despite never knowing the late financier and sex offender.
Starmer is under pressure over his decision to appoint Peter Mandelson as US ambassador despite knowledge of Mandelson’s links to Epstein. The latest document released by the U.S. Department of Justice revealed more messages between Mandelson and Epstein, including Epstein pleading guilty in Florida to a state charge of soliciting prostitution, a case involving an underage girl.
Facing calls to resign, Starmer apologized to Epstein victims for believing Mandelson’s “lies”.
Here are the latest developments
Starmer’s Cabinet ministers have sought to rally around Starmer, who has faced growing anger from opposition parties and members of his own party over his decision to appoint Mandelson.
Two successive resignations have added to the pressure, with Starmer’s chief of staff Morgan McSweeney and communications director Tim Allan stepping down.
Downing Street Chief of Staff Morgan McSweeney arrives at Downing Street on October 06, 2025 in London, England.
Leon Neal | Getty Images News | Getty Images
The outrage led Anas Sarwar, leader of Starmer’s Labor Party in Scotland, to call on Starmer to resign.
“The distraction needs to end and the leadership in Downing Street needs to change,” Sarwar said at a press conference on Monday. he said.
Starmer then held a crucial meeting with Labor MPs. reportedly He said he was “not ready to walk away.”
A spokesman for the Prime Minister’s Office was not immediately available for comment.
Who is Peter Mandelson?
Mandelson was a key figure in the centre-left Labor Party for decades and played a key role in the so-called “New Labour” movement that enabled Tony Blair to become prime minister after his landslide election victory in 1997.
He is known as a behind-the-scenes fixer and “Prince of DarknessMandelson was a Labor member of parliament from 1992 to 2004 and served in Blair’s cabinet.
He left parliament to become a member of the European Commission before returning to the UK in 2008 to work with then Prime Minister Gordon Brown, who was appointed to the parliament’s unelected House of Lords.
US President Donald Trump with then-British Ambassador to the US Peter Mandelson at the White House on May 8, 2025.
Anna Money Maker | Getty Images News | Getty Images
After becoming prime minister in July 2024, Starmer appointed Mandelson as ambassador to Washington that December, a role he described at the time as “a great honour”. The appointment was controversial because Mandelson had previously resigned twice in 1998 and 2001 over scandals: once over failure to declare credit and the other over alleged influence on his passport application.
Starmer fired Mandelson from the embassy in September after Downing Street said new information had come to light about the extent of his relationship with Epstein.
The release of millions of files from the US Department of Justice last week showed further connections between Mandelson and Epstein. They led to accusations against Mandelson market sensitive government information sent Epstein in the wake of the 2008 global financial crisis.
In an exchange, Mandelson was seen giving Epstein advance notice of his €500bn bailout plan for banks in 2010.
In a statement to UK broadcaster Sky News last month, Mandelson apologized for continuing his friendship with Epstein after his conviction in 2008.
“I was not guilty, I had no knowledge of what he did, and I regret that weak women were not given the protection they expected, and I will regret it until the day I die,” she said.
Markets react
The UK government’s borrowing costs rose on Monday as pressure mounted on Starmer.
Yields on UK government bonds, known as gilts, fell on Tuesday after several Cabinet ministers rallied around the prime minister.
Benchmark return 10 years gilded It decreased by 3 basis points to 4.496%. 30 years gilded Its yield also decreased by 4 basis points to 5.309%.
“Uncertainty over Keir Starmer’s future is not helpful to UK bond markets, particularly as inflation is on track to fall quite sharply in the coming months and the Bank of England looks set to cut interest rates in March, with one or two further cuts later in the year,” Charlie Lloyd, chief investment officer at Shackleton Advisers, said in a note on Monday.
Lloyd added that Starmer’s resignation would trigger a competition within the Labor Party to replace him as leader, which would “almost certainly lead to short-term volatility in UK bond markets and an increase in the cost of borrowing through higher yields”.
“If gilt yields trade at a premium to other bond markets for an extended period of time, a prolonged competition could impact the economy, not to mention the potential impact on consumer confidence,” he continued.
Who could replace Starmer?
Former Labor Deputy Prime Minister Angela Rayner delivers a speech during the Labor Party’s North West Regional Conference at the Titanic Hotel on January 25, 2026 in Liverpool, England.
Ryan Jenkinson | Getty Images News | Getty Images
If Starmer resigns, a leadership contest to replace him will begin and a series of votes will be held to narrow down the number of candidates. If Starmer refuses to resign but his rival wins enough support to trigger a leadership vote, the prime minister and that rival will be put to a vote. Both processes can take weeks.
Potential candidates to replace Starmer include left-wing Angela Rayner. Current health minister Wes Streeting, who resigned as deputy prime minister last autumn following a tax scandal, and former party leader Ed Miliband.
The current mayor of Manchester, Andy Burnham, recently blocked He avoided standing in a special election that would have returned him to parliament, paving the way for a potential leadership challenge.
Despite Burnham’s popularity, investors are wary of Starmer and finance minister Rachel Reeves drifting away from efforts to shore up the UK’s public finances.
Kallum Pickering, Peel Hunt’s chief economist, said in a note on Tuesday that Burnham “surveys strongly” but “whether successful regional economic policies will translate into successful national policies is an open question – past doubts that Britain is ‘hostage to bond markets’ have alarmed investors.” he said.
Pickering said the fact that Rayner remained under investigation over his tax affairs “hurts his chances and risks the narrative that one scandalized Prime Minister has been replaced by another Prime Minister”. But he added: “His popularity within the party shows that he can unite the left with the moderates.”
