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Andy Burnham steps into Number 10 with key decisions on the horizon.
Last updated: 21 July 2026
Andy Burnham became Britain’s seventh prime minister since 2016 when he strolled through the door to Downing Street on Monday morning.
Like most politicians, he was keen to use this stage to project a sense of optimism and momentum. Supporters lined the road to hear what the King of the North would have to say on his triumphant arrival in the capital. However, there was no hiding the difficult situation he had inherited, which will surely mean he runs into both economic and political problems sooner rather than later.
The decisions he makes now will have a significant bearing on the pound’s trajectory in the months to come. He must also reassure businesses that his government will create an environment that promotes growth and supports the subdued employment market.
New priorities
One of Burnham’s first promises as prime minister was to act as a “circuit breaker” for UK politics. Ending the cycle of short-termism at the summit of this nation’s government will require close control of his party, which has proved challenging in the recent past.
Still, he fired a shot across the bows by unveiling more than £300mn to go towards ending rough sleeping. According to media reports, the next stages of a pre-holiday policy blitz could include scrapping controversial plans for a digital ID and slashing VAT on energy bills.
New taxes
Britain’s tax burden recently hit its highest level since the 1940s. Despite tight departmental budgets and the record tax take, the government’s fiscal headroom, i.e. the gap between its budget and the maximum amount it can spend within the rules, remains razor thin.
Burnham has previously committed himself to maintaining the fiscal guidelines and protecting investor confidence. Nevertheless, his plans for housing, social care, energy support and public investment will need to be funded. He might ask wealthier households for a little more money, possibly via wealth taxes. Income tax rises could prove politically unviable, which has led to some speculation that he will turn to exit or immigration taxes to fill the shortfall.
It should be said at this stage that we actually know very little when it comes to Burnham’s economic vision. The lack of an election campaign means we only have a broad understanding of what could come next.
The next Budget could revisit everything from capital taxation, employer costs, energy levies and the treatment of higher earners. Even where headline corporation tax remains unchanged, alterations to allowances, reliefs and payroll costs can materially affect cashflow.
Same Britain
While Burnham has promised a change in direction for the country, the reality is he faces many of the same constraints as his predecessor.
New policies will require buy-in (or at least, the lack of serious foot-stomping) from Britain’s bond investors. Liz Truss and Keir Starmer will each be able to attest to the importance of keeping the cost of borrowing manageable.
From a political perspective, Burnham faces a challenge staving off the threat of Reform, although the cloud of scandal around Nigel Farage has relegated that to a secondary priority for the time being. Without wishing to be too gloomy, the fact is that Britain’s growth is weak and its politics is divided. It will take an almighty effort to set the country back on the right course before the next election.
The impact on the pound
Sterling’s initial reaction to Burnham’s arrival was relatively restrained. The pound strengthened in the days before he entered Number 10, although gilt yields moved higher on the back of some fairly innocuous comments about the self-imposed spending rules.
Currency markets are likely to judge Burnham’s government primarily on fiscal credibility. A programme that raises investment and improves productivity could ultimately support sterling. Conversely, large unfunded commitments could increase government borrowing costs and revive concerns about Britain’s public finances.
The decision to appoint John Healey as chancellor shows that team Burnham is taking the issue of fiscal discipline seriously. Widley regarded as one of the most market-friendly options available, Healey will still be under pressure to deliver the prime minister’s agenda with very little wiggle room. He will be hoping to raise funds without harming growth, with the pound likely to be affected in either event.
GBP/USD: the past month
The more things change…
As is always the case, nobody can say exactly how Britain’s new prime minister will impact the pound or your business. The sensible course of action is not to predict what might happen, but to understand how the various scenarios could affect your margins and cashflow and manage the risk accordingly.
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