Investors factoring in UK political risk

Mike Taylor

Managing Editor and Publisher

12 May 2026

Financial markets are now treating United Kingdom (UK) political risk as a major factor driving asset prices, according to UK-based deVere Group chief executive, Nigel Green.

According to Green, UK financial markets reacted negatively in real time to Prime Minister, Keir Starmer’s Monday ‘reset’ speech, with gilt yields climbing sharply and Sterling weakening as investors assessed the growing political crisis engulfing the UK Government following devastating local election losses.

“The UK 10-year gilt yield surged toward the critical 5% level during the speech, while 30-year gilt yields climbed even more aggressively, signalling deep concern over Britain’s long-term fiscal outlook,” Green said.

“At the same time, the pound weakened against the dollar as traders cut exposure to UK assets and moved toward traditional safe havens.”

Green said Starmer’s speech was supposed to reset the political narrative after the election but, instead, financial markets are signalling deep anxiety about where Britain goes from here.

“Investors are looking at a prime minister fighting for his political life after severe election losses while simultaneously trying to convince markets that fiscal discipline remains intact. This combination immediately raises the temperature in bond and currency markets.”

The local election results triggered intense political fallout across Westminster, with critics inside and outside Labour arguing that Starmer has failed to reconnect with voters on growth, living standards, immigration and economic confidence.

The political damage has rapidly spilled into financial markets because investors fear prolonged instability could weaken the government’s ability to maintain spending restraint at a time when Britain’s debt burden remains elevated and borrowing costs are already under pressure globally.

“Bond traders are effectively warning that they want clarity, authority and discipline from Starmer’s government.

“Political weakness matters enormously in sovereign debt markets because investors start questioning whether difficult fiscal decisions can still be delivered. Once that process begins, yields move higher very quickly,” Green said.