# Gilts and pound suffer sell-off as market frets over Labour leadership

By Susannah Streeter — 2026-05-15

Susannah Streeter, chief investment strategist at Wealth Club, said: “In the UK, the immediate shock of the political crisis has receded, but it’s still clinging on like a damp squib and weakening sentiment.

“With Andy Burnham, the Mayor of Manchester attempting to barrel his way into Number 10 via a by-election, it’s set off another wave of worry about political instability.

“Sterling has dropped and UK borrowing costs are on the rise again.

“After receding yesterday 10-year gilt yields have marched higher, back above 5.1 per cent.

“Burnham’s big hurdle of course is winning the by-election and so this leadership race looks set to be long and cumbersome.

“Another bout of political infighting, with yet another Prime Ministerial shuffle under way is hardly a good look for a country which needs to portray stability to attract investment.

“The pound is feeling the pain, amid the pile-on of uncertainty about the UK’s political future.

“It’s weakened to trade around the lowest level in more than a month, at $1.33, and has also slipped against the euro. This fall in sterling is set to make British companies more attractive takeover targets.

“Already, plenty of UK-listed firms are considered to be vulnerable, given the valuation gap relative to the US and, to some extent, European peers. This cracked open after Brexit and risks widening further, amid the unpredictability.”

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