Britain battered by markets as Labour chaos takes hold with Burnham-backing Left demanding post-Starmer spending spree and vowing to torpedo Streeting

By JAMES TAPSFIELD, UK POLITICAL EDITOR Published: 08:50, 12 May 2026 | Updated: 08:52, 12 May 2026 Britain was brutally pummeled by markets today as Labour chaos looks set to sweep away Keir Starmer.    The UK's borrowing costs surged higher with traders taking fright at the prospect of a lurch to the Left, heaping pressure on the public finances. The Pound also weakened against the US dollar and euro, while the blue-chip FTSE 100 dropped.  Just two years after they came to power boasting of a new era of stability, a Labour civil war is gearing up as the PM's grip falters in the wake of the local elections. Factions are wrestling over the timetable for appointing a successor - with supporters of Blairite Wes Streeting believing a quick contest is his best chance of victory. But the Left wants to keep Sir Keir in place until September, so Manchester Mayor Andy Burnham has a chance to become an MP again. Allies of Mr Burnham told Sky News that they will 'not accept another London leader', as they battle to control the party's future direction.  The UK's borrowing costs surged higher with traders taking fright at the prospect of a lurch to the Left, heaping pressure on the public finances The Labour Left wants to keep Sir Keir in place until September, so Manchester Mayor Andy Burnham has a chance to become an MP again Factions are wrestling over the timetable for appointing a successor - with supporters of Blairite Wes Streeting believing a quick contest is his best chance of victory Extraordinarily, the Left-wing Tribune group of more than 100 MPs has chosen this moment to call for less 'caution' on fiscal policy.  Former minister Louise Haigh, who chairs the group, said the current fiscal rules 'resolved in favour of caution'. She also demanded big tax rises on wealth.  The yield on 30-year UK Government bonds – known as gilts – jumped as much as 11 basis points to 5.785 per cent in morning trading. That is within touching distance of the 28-year high recorded last week. The yield on 10-year gilts also rose back above 5 per cent, lifting by 10 basis points to 5.101 per cent - although that is below recent highs last month. Part of the move is down to the Iran war turmoil, but the UK has been worse hit than other countries.   Sterling also weakened further while stocks on the London market dropped sharply on rising oil prices. Sterling fell 0.5 per cent to 1.35 US dollars and was 0.2 per cent lower at 1.15 euros. The FTSE 100 Index shed more than 1 per cent in opening trade, later settling 95.57 points lower at 10173.86. No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards. By posting your comment you agree to our house rules. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. To do this we will link your MailOnline account with your Facebook account. We’ll ask you to confirm this for your first post to Facebook. You can choose on each post whether you would like it to be posted to Facebook. Your details from Facebook will be used to provide you with tailored content, marketing and ads in line with our Privacy Policy.