UK Prime Minister "forced to face palace coup": Health Secretary resigns, "King in the North" plots return to Parliament, pound falls nearly 1% intraday

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British Prime Minister Starmer is facing the most severe political crisis since taking office.

On Thursday the 14th local time, the Labour Party’s internal “coup” escalated: Health Secretary Wes Streeting announced his resignation and publicly called for a party leadership contest; meanwhile, Manchester Mayor Andy Burnham secured a path to return to Parliament, widely seen as paving the way to run for Labour leader and even prime minister.

The political turmoil quickly impacted the currency market. After news broke during the European session of Streeting’s resignation, the pound fell sharply against the dollar. During the US session, after Burnham announced he would seek to return to Parliament via a by-election, the pound plunged further, briefly falling below 1.3400, hitting an intraday low since April 13, with a daily drop close to 1%.

Market participants believe investors have begun repricing UK political uncertainty, worried that Labour could plunge into the same chaos of frequent leadership changes as under the Conservatives.

Health Secretary suddenly resigns, openly calls for Starmer to step down

The trigger for this crisis was the unexpected defection of prominent Labour figure Streeting.

According to Reuters, The Guardian and other media, Streeting resigned as Health Secretary on Thursday and publicly stated that remaining in Cabinet was “no longer honourable,” calling for a leadership election within Labour.

Streeting has long been seen as a potential successor in the “post-Starmer era” within Labour. He was originally a key Starmer ally, but recently tensions between the two became public. Reports say Streeting criticized Starmer for lacking a clear vision and being unable to lead Labour to victory in the next general election.

Notably, Streeting did not immediately announce his candidacy for party leader. Analysts believe a key reason is his current level of support within the parliamentary party is not yet enough to secure a place on the final shortlist. According to Labour rules, leadership candidates must receive backing from a certain number of MPs.

Nevertheless, his resignation is already seen as a major signal that the Labour leadership “coup” has become public.

Media reports say several Labour MPs and government officials have recently openly questioned Starmer’s leadership, with some even demanding a timetable for his departure. Labour’s poor performance in recent local elections has further fueled party anxiety.

“King of the North” Burnham set to return to Parliament, seen as strongest challenger

Compared to Streeting, what’s attracting even more market attention is Manchester Mayor Burnham’s recent moves. Polls show he is currently one of the most popular politicians in the UK.

On Thursday, Labour MP Josh Simons suddenly resigned his seat, clearing the way for Burnham to contest a by-election and return to Parliament.

Since the Labour leader must typically be an MP, Burnham, despite his popularity, was previously ineligible to challenge Starmer. Now, that procedural barrier is being removed.

Media reports say Burnham is now widely regarded as one of the strongest contenders to challenge Starmer.

Burnham was born in the Liverpool suburbs, worked in journalism and for a union, and in the late 1990s served as an adviser to Tony Blair’s government. He became an MP in 2001, then rose to Cabinet roles, including Health Secretary under Gordon Brown. After failing to win Labour’s leadership in 2010 and 2015, Burnham resigned as an MP in 2017 to become the first Mayor of Greater Manchester.

As mayor, Burnham has in recent years built a mass following in the North with public transport reforms, local governance, and a “soft left” stance, earning the media nickname “King of the North” for Labour.

Numerous polls show Burnham’s support among both ordinary voters and Labour grassroots is higher than Starmer’s. In some surveys, Labour supporters prefer Burnham as prime minister over Starmer.

However, Burnham is still taking a relatively cautious approach. He has not publicly declared a challenge to Starmer, instead saying he hopes to “give the government space for stability.” But the market widely views his move to re-enter Parliament as highly significant politically.

Why has Starmer suddenly fallen into a “governing crisis”?

Just over a year ago, Starmer led Labour to end the Conservatives’ long rule, earning a reputation as “Mr Stability” in British politics.

But now, his approval rating has clearly declined.

Analysts believe the core reasons for Starmer’s crisis include:

The UK’s weak economic recovery, with public dissatisfaction over the cost of living;
Labour’s failure to deliver some reform pledges after coming to power;
Policies like cutting winter fuel subsidies sparking grassroots backlash;
Poor performance in recent local elections;
The rapid rise of right-wing populist forces like Reform UK.

More crucially, Labour is internally worried that, if Starmer continues to lead, the party may not retain power in the next general election.

This has brought talk of “changing leaders early” from behind-the-scenes discussion into the open.

Nevertheless, Starmer is still refusing to resign. On Thursday he said he would “fight to the end,” warning that leadership contest could throw the UK back into political chaos.

If the UK “changes prime minister,” what do financial markets fear most?

For financial markets, what truly unnerves investors is not simply “who is prime minister,” but whether the UK will again plunge into constant internal political wrangling.

After the frequent leadership changes under Johnson, Truss, and Sunak, markets had hoped the Labour government would bring prolonged stability. Now, with intra-party infighting heating up again, UK political risk premiums may return.

Institutional analysis suggests if a Labour leadership contest begins:

The pound may remain under short-term pressure;
Volatility in UK government bonds may rise;
Investors will re-evaluate the UK’s fiscal discipline and economic reform path.

However, most analysts also point out: whether Streeting or Burnham succeeds, Britain’s macro policy is unlikely to see a “Truss-style” radical shift.

The real risk is more likely to come from ongoing political uncertainty itself.

Risk disclosure and disclaimerThe market carries risks and investment should be prudent. This article does not constitute personal investment advice, nor does it consider the specific investment goals, financial situation or needs of individual users. Users should consider whether any opinion, viewpoint, or conclusion herein fits their situation. Investment is at your own risk. ```