UK borrowing costs rise and pound falls as leadership drama continues

Observers noted that Burnham would need the local party to select him as the candidate for Makerfield and then win the by-election, a contest that could be close with Reform UK.

AJ Bell analyst Russ Mould and other commentators linked market movements to uncertainties around Labour leadership and Burnham's potential policy stance, while Jefferies’ Mohit Kumar highlighted fears that a Burnham government could widen deficits.

The Brent crude price rose to over $109 a barrel on Friday morning, up from $105.72 on Thursday, before easing to below $108 in the afternoon.

The 10-year gilt yield rose above 5.17%, the highest since 2008, while the 30-year gilt yield climbed to 5.84% by early afternoon, a 28-year high for long-term borrowing costs. The pound fell about 0.3% to around $1.336, marking a 1.5% drop over the week. Analysts attributed the moves to concerns that a Burnham-led government could increase deficits and to broader leadership turmoil, with commentary noting that Burnham is seen as less market-friendly than other candidates. The FTSE 100 fell around 1.7%, and there were signs that foreign buyers might be pulling back from gilts.

Andy Burnham, the mayor of Greater Manchester, confirmed he would run for a seat in Parliament after MP Josh Simons said he would stand down to make way for the Labour leadership hopeful, triggering a by-election bid.