Sir Keir Starmer resigns as Prime Minister with Andy Burnham poised to take over

Andrew Prosser, head of investments at InvestEngine, said: “After weeks of speculation, Prime Minister Keir Starmer has confirmed his resignation triggering a Labour leadership contest this summer. For long-term investors, this news is less about who leads Labour and more about what impact this news will have on markets, and how long this will go on for.

“Prolonged uncertainty tends to keep bond markets on edge, and we’ve already seen that reflected in fluctuations in gilt yields. When Starmer initially faced calls to resign, gilt yields spiked, before falling back as he vowed to fight on. Then immediately after news broke of Andy Burnham’s win, we saw another slight rise, from 4.75 per cent to 4.85 per cent. However, this reaction was smaller than some may have expected – potentially because his win was so widely assumed.

“Higher gilt yields increase the Government’s borrowing costs and can also push up borrowing costs for mortgages and loans.

“Political instability – such as a change in prime minister – can create both risks and opportunities for investors but those who want to grow their money over the long term should not be worried. This upheaval may move markets in the short term, but history has shown markets always recover, and often quicker than expected.

“The investors who tend to come out ahead of periods like this are the ones who stay diversified and stay invested. Our advice is that long-term investors should avoid making knee-jerk decisions, ignore the noise and sit on their hands. Time in the market, as ever, matters more than timing the market.”