Streeting’s resignation could send gilts down, pound heading into crisis territory

The CEO of one of the world’s largest independent financial advisory and asset management organizations has warned that the gilt and the pound could be in trouble if Wes Streeting resigns from the UK Cabinet tomorrow to mount a leadership challenge against the Prime Minister.

Strict warning from Nigel Green
Deavere GroupThere has been growing speculation that Streeting could resign as health secretary and launch a race against Keir Starmer, opening the door to a prolonged power struggle inside the government, at a time when markets are already punishing Britain.

He adds: “Should Wes Streeting resign tomorrow and launch a leadership challenge, gilts and sterling could rapidly move into crisis territory.

“Markets hate uncertainty, but they hate political vacuum even more.

“The resignation of the Cabinet after a leadership tussle would signal that the government is losing control of itself while investors are already questioning the country’s fiscal direction.”

Warning signs are already visible on UK properties. The benchmark 10-year gilt yield rose to 5.13% this week, the highest since 2008, while the 30-year gilt yield rose above 5.8%, a level last seen in 1998. Sterling slipped to $1.35 against the dollar as traders reduced UK exposure.

Higher gilt yields mean higher borrowing costs for the government, more pressure on mortgage pricing and a more expensive financing environment in the economy.

The Deavere CEO adds: “If gilts are oversold, the cost to the economy system is reduced. The treasury overpays, households realize this, businesses delay decisions, and confidence weakens.

“Streeting’s resignation will be interpreted as the start of something bigger. The market will immediately ask who is next, how many ministers move forward, and whether the administration can survive in its current form.”

He warns that once a senior figure moves on, others may follow, with former Deputy Prime Minister Angela Rayner likely to become central in the next phase of internal power dynamics.

“If the Streets bounce back, the pressure multiplies. Others will then have to choose sides. Angela Rayner’s position becomes important, and investors will begin to evaluate the possibility of the government pulling further to the left on tax, spending and labor policy.

“This is where the real concern begins. The market can deal with any ideology if it is disciplined and consistent. They shy away from programs that borrow materially more without a credible growth engine.”

Investors still remember the gilt turmoil of 2022, when a loss of confidence in fiscal credibility led to a violent bond selloff and forced the Bank of England to intervene. Nigel Green says the current backdrop is different, but the memories remain powerful.

“The UK does not need a repeat of 2022 to suffer losses. Investors only need to suspect that discipline is weakening again. Once this suspicion is reinforced, the risk premium rises sharply.

“This week’s gilt moves show confidence is already fragile. Add a leadership war and the backlash could be severe.”

He noted that Britain is also grappling with sticky inflation risks, increased global bond yields and geopolitical energy pressures, leaving little room for domestic political mistakes.

“The timing could hardly be worse. Global borrowing costs are high, inflation concerns have not disappeared, and capital is highly selective. In that environment, countries that look unstable are the first to be punished.”

Nigel Green says the market will be watching three immediate indicators if Streeting resigns: the 10-year gilt yield, long-term gilt liquidity, and sterling against the dollar.

“If the 10-year yield breaks decisively off recent highs, if longer-dated gilts come under heavy pressure again, and if sterling falls sharply through support levels, this market will deliver a blunt verdict.”

He further said that clarity could still prevent tensions from escalating.

“The solution is political authority and fiscal credibility. Investors need to know who is in charge, what the economic framework is and whether it will be sustained.”

“If resignations, rebellions and competing promises come tomorrow, the UK risks turning a political drama into a major market event. It will likely be costly, avoidable and immediate.”

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