Labour unrest sparks sterling jitters in City

STERLING will suffer from speculation over Keir Starmer’s leadership until at least the May elections, economists have predicted, with 2026 tipped to become another year where Westminster infighting sparks City jitters.

- By JOHN SMITH

Analysts at Investec have suggested further strengthening of the pound will be held back by continued questions over Starmer's authority across the Labour Party.In a preview of the UK economy over the upcoming year, Investec’s Ellie Henderson warned that a “fairly resilient backdrop” for the economy could be undone by chaos in SW1 after crucial local elections in May.

Henderson said forecasters at the City firm had “pencilled in an element of sterling weakness” due to the potential for the current Labour Government to break up over dire election results.

Among the local authorities expected to hold elections are 32 London borough councils, plus seats across the likes of Birmingham, Newcastle and Manchester.