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UK government borrowing costs rise as Starmer ‘fails to reassure bond markets’ – business live | Business
Keir Starmer’s speech ‘fails to reassure bond markets’ as yields rise higher
UK government borrowing costs are creeping a little higher after a morning of rising political jitters.
The yield, or interest rate, on UK 30-year bonds is now up 8 basis points (0.08 of a percentage point) at 5.65%, up from 5.57% on Friday night. That’s higher than just before Keir Starmer’s speech this morning, when they were up about 5bps.
Benchmark 10-year bond yields have risen higher too – now up 6bps, having been 4bps higher earlier in the morning.
Rising bond yields indicate that bond prices have dropped, suggesting less appetite for UK debt and pushing up the cost of borrowing.
These increases comes as Labour MP, David Smith, has said Starmer should set a timetable for his departure and that the government neeed “to act faster, and be more radical”.
Update: Labour MP Catherine West, who announced a challenge to Starmer over the weekend, has now said she wants the prime minister to set a timetable of September for an orderly departure.
Susannah Streeter, chief investment strategist at Wealth Club, says there are concerns in the bond markets that a change of Prime Minister would prompt wider turmoil at the top of government, and less focus on fiscal rules.
Streeter writes:
“Keir Starmer’s address to the nation hasn’t done the trick of calming bond markets. There is still a sense of jitters playing out as concerns about political instability collide with inflationary fears prompted by the ongoing conflict in the Middle East. His speech was designed to project a ‘keep calm and carry on’ message, but the worry is that it lacks the real substance needed to keep Labour MPs on side.
Ten-year gilt yields have crept higher, nudging 5% once more, while longer-dated government debt remains hovering above 5.6%. They have not been at this level for a sustained period since the late 1990s.
Key events
Enrique Díaz-Alvarez, chief economist at global financial services firm Ebury, argues that the pound has weathered the results of the May local elections in the UK remarkably well.
With sterling down just 0.2% so far today, Díaz-Alvarez argues that the Labour bloodbath was roundly expected and priced in by markets, adding:
“Investors are betting that Labour’s overwhelming defeat will not end Starmer’s premiership just yet, but pressure on the prime minister looks set to intensify in the coming days, with a number of backbenchers already calling for his resignation.
“As this is written, no potential rivals on his left have launched a formal bid to replace him, although there are murmurs that the likes of Rayner and Streeting are privately weighing their options.
“A potential lurch to the left is what markets fear most, as this could mean higher taxes, heavier gilt issuance and a broader fiscal risk premium baked into UK assets.
Shorter-dated UK government bonds, which are more sensitive to short-term inflation risks, are also weakening today.
This has pushed up the yields on two-year, and five-year, gilts by around 8bps today – bigger rises than for US shorter-dated bonds.
And still UK bond yields creep higher.
The 30-year bond yield is now up 9.3 basis points (0.093 of a percentage point), to 5.67%.
That takes it nearer to the 28-year high of 5.78% hit last week, amid uncertainty about the future of Keir Starmer’s government.
Keir Starmer’s speech ‘fails to reassure bond markets’ as yields rise higher
UK government borrowing costs are creeping a little higher after a morning of rising political jitters.
The yield, or interest rate, on UK 30-year bonds is now up 8 basis points (0.08 of a percentage point) at 5.65%, up from 5.57% on Friday night. That’s higher than just before Keir Starmer’s speech this morning, when they were up about 5bps.
Benchmark 10-year bond yields have risen higher too – now up 6bps, having been 4bps higher earlier in the morning.
Rising bond yields indicate that bond prices have dropped, suggesting less appetite for UK debt and pushing up the cost of borrowing.
These increases comes as Labour MP, David Smith, has said Starmer should set a timetable for his departure and that the government neeed “to act faster, and be more radical”.
Update: Labour MP Catherine West, who announced a challenge to Starmer over the weekend, has now said she wants the prime minister to set a timetable of September for an orderly departure.
Susannah Streeter, chief investment strategist at Wealth Club, says there are concerns in the bond markets that a change of Prime Minister would prompt wider turmoil at the top of government, and less focus on fiscal rules.
Streeter writes:
“Keir Starmer’s address to the nation hasn’t done the trick of calming bond markets. There is still a sense of jitters playing out as concerns about political instability collide with inflationary fears prompted by the ongoing conflict in the Middle East. His speech was designed to project a ‘keep calm and carry on’ message, but the worry is that it lacks the real substance needed to keep Labour MPs on side.
Ten-year gilt yields have crept higher, nudging 5% once more, while longer-dated government debt remains hovering above 5.6%. They have not been at this level for a sustained period since the late 1990s.
Mobile users cry foul over price rises
Mark Sweney
The telecoms regulator has received more than 100,000 complaints from O2 and Sky mobile customers angry over the introduction of surprise price rises.
Ofcom said that the issue of mid-contract price rises foisted on mobile customers, which has resulted in an exodus of customers and provoked an angry response from the government, fuelled the first quarterly increase in complaints about services by the UK’s major telecoms companies for two-and-a-half years.
Complaints about O2, the UK’s second biggest mobile operator with 12.5m consumer customers, more than tripled quarter-on-quarter in the first three months of the year.
The company, which is owned by Virgin Media O2, faced a backlash in October when it announced that mobile bills would rise by £2.50 a month for all customers, the equivalent of £30 a year, from last month.
This is 70p, or 40%, more than the £1.80 increase customers were informed of when they initially signed up to their contracts.
Ofcom said that the rate of complaints about O2 soared from just two per 1,000 customers in the fourth quarter last year to seven per 1,000 customers in the first three months this year.
This works out to almost 87,000 complaints, based on O2’s consumer customer base, and made the mobile network the most-complained about by some distance in Ofcom’s report.
The average across the seven mobile operators tracked by Ofcom was a complaint level of three per 1,000 customers.
The move by O2 sparked a rebuke from the chancellor, Rachel Reeves, and Liz Kendall, the technology secretary.
A customer backlash saw O2 lose 165,000 customers in the fourth quarter last year, with the company attributing about 110,000 of those directly to price increases.
Complaints to Ofcom about Sky Mobile, which is estimated to have almost 4m customers, almost doubled in the latest quarterly report.
Sky received five complaints per 1,000 customers, up from three per 1,000 in the fourth quarter, which works out to almost 20,000 complaints to Ofcom.
At the beginning of the year Sky announced that most of its mobile customers would see their monthly bill increase by £1.50, an annual increase of £18 a year, with the price rise coming in to force from Valentine’s Day.
The company said that it was the first mid-contract price rise it had implemented for mobile customers in more than seven years.
Last January, Ofcom introduced new rules banning mid-contract price rises linked to inflation, and said that telecoms companies must tell customers up front in “pounds and pence” about any future price rises.
“It is disappointing to see an increase in customers complaints during this quarter, especially following a sustained period of decreases in the complaints we received about telecoms companies,” said Cristina Luna-Esteban, Ofcom’s director of consumers and retail markets. “However, a main driver of these complaints appears to be unexpected mid-contract price rise announcements for some mobile customers in the Autumn of 2025.”
XTB: Bond market calm after ‘no knockout blow’ against Starmer
The UK bond market is “relatively stable” after Keir Starmer came out fighting this morning, reports Kathleen Brooks, research director at XTB.
She explains:
Although the PM faced challenges to his leadership over the weekend, there has been no knockout blow, and so far on Monday, the markets are calm, yields are moderately higher, and the pound remain above $1.36, even though the dollar is higher on a broad basis today.
For now, it looks like the market is not taking Angela Rayner’s proposal for how to reinvigorate the economy and Labour’s chances seriously. She doesn’t seem to grasp policy trade-offs, for example, she says that creating jobs for young people can go hand in hand with a higher minimum wage. Although the polls give a damning verdict on this government’s track record so far, the markets are clearly willing to ignore the internal fighting going on in the Labour party this week.
The relatively mild reaction in the bond market, 10-year Gilt yields are higher by 4bps, and it remains below 5%, suggests that traders do not believe that the threat to Keir Starmer will materialise. It would need a bigger blow to send yields higher, at this stage. If Starmer can get over this challenge, then the focus will go back to the data: can the economy grow, and can the public debt remain stable? If those things change, potentially because of a new leader, then the Gilt market will react.
There’s little reaction in the bond markets to Keir Starmer’s make-or-break speech, in which he pledged to fight any challenge to his leadership, and promised a new direction on Europe.
The yield, or interest rate, on 30-year UK bonds is now up around 6.7 basis points, up from 5.6bps at the start of the speech.
Ten-year bond yields are up 5bps, up from 4.3% before Starmer took to the lecturn.
These moves shows that bond prices slipped slightly during the speech, with borrowing costs still higher on the day.
E.ON acquires British energy supplier OVO
In the energy world, Germany’s E.On has agreed to buy rival Ovo to create one of Britain’s largest suppliers.
The deal brings together two of the UK’s larger energy suppliers.
In the UK, E.On serves nearly one in seven households and businesses, while Ovo has four million home energy customers.
E.On says existing tariffs will be honoured, and service will continue unchanged.
Chris Norbury, CEO of E.ON UK, says the deal will create a retailer with the capability, the technology and the customer base to make “new energy work for everyone”.
Norbury explains:
“For decades the UK energy system focused too much on those upstream. Now is our opportunity to change that. Solar, batteries, EVs and a retailer built to orchestrate. That is what this deal is about: customers in control and new energy that works for everyone.”
Chris Houghton, CEO of OVO, says:
“The energy market has fundamentally changed in recent years. OVO was founded to challenge the status quo, and we’ve built a strong retail business focused on delivering for customers and supporting the transition to cleaner energy.
“As the market has evolved, scale and access to significant long-term capital for the energy transition have become non-negotiable. Following a thorough review, we believe this decision gives the business the strongest footing for the future.
The GMB union have welcomed Keir Starmer’s decision to nationalise British Steel from its Chines owners, Jingye.
Charlotte Brumpton-Childs, GMB National Secretary, said:
“Unions have long known Jingye will not negotiate in good faith.
“This legislation will cover the whole steel industry – it isn’t specifically for British Steel but it is what will protect it from foreign owners.
“British Steel is a nationally strategic asset, it is right the Government does everything in its power to secure its long term future.
“GMB welcomes this decisive and timely intervention by the Government which will protect one of the UK’s most important industries.”
Starmer confirms nationalisation of British Steel
During his leadership reset speech, Keir Starmer has confirmed that the government will nationalise British Steel.
The PM describes steel as “the ultimate sovereign capability”, arging that strong nations in today’s world need to make steel.
And he declares:
I can announce that legislation will be brought forward this week to give the government powers [subject to a public interest test], to take full national ownership of British Steel.
‘This week’ suggests it will be part of the new legislative programme laid out in the king’s speech on Wednesday.
British Steel employs 3,500 people at its plant in Scunthorpe, and came under government control last April amid fears that its owner, Jingye, was planning to shut down the site.
Bank of England policymaker Megan Greene has said it is worth waiting “a little while” to see how the Iran war unfolds before deciding whether to raise interest rates.
Greene, one of the more hawkish members of the Bank’s monetary policy committee, has told Bloomberg’s Odd Lots podcast that the UK faces ‘upside’ risks on the outlook for inflation.
But, she suggests, it is better not to rush a decision on raising rates, until the ‘progression’ of the war is clearer.
She says:
“It’s worth waiting for a little while to see what happens with the progression of this war and therefore see what we can infer about how it will propagate through the economy before we make a move.”
“We’ve now had a negative supply shock, an energy shock, and that stands to push inflation up and growth down, which is a terrible situation for a central banker to be in.”
Keir Starmer is about to give a crunch speech, as pressure on the PM rises – my colleague Andrew Sparrow will be live-blogging it here:
European stock markets are broadly lower in early trading, as the deadlock over the Middle East conflict worries investors.
France’s CAC 40 index is down 0.75%, while Germany’s DAX has lost 0.2%.
In London, though, the FTSE 100 is up 29 points or 0.3%, with banks and oil companies among the risers.
A precise figure of how much full nationalisation of British Steel could cost has not been announced and it is understood that following legislation an independent valuation would be carried out of the business, to see what, if any, compensation might be due to Jingye.
UK News
Middle East crisis live: Trump rejects Iran response to US peace proposal as Tehran warns of new attacks | US-Israel war on Iran
Key events
Hezbollah started firing at Israel shortly after the US and Israel launched its war on Iran by killing the country’s former supreme leader on 28 February. Israel responded with airstrikes and launched a ground invasion of southern Lebanon.
The Israeli military now occupies a strip of Lebanese land along the border. Officials claim they want to create a ‘security zone’ to protect Israel’s northern communities from Hezbollah attacks. But this has stoked fears of a long-term occupation.
Sweeping evacuation orders have forced hundreds of thousands of Lebanese people to flee and many fear they won’t be able to return as homes are demolished and Israeli attacks across southern Lebanon continue without any rebuke from the US, which brokered the ceasefire agreement between the Lebanese government and Israel last month.
Israel is pushing for the disarmament of Hezbollah, something the militant group has rejected. Hezbollah, which is not part of the Lebanese government’s security apparatus, has been targeting Israeli troops in Lebanon.
It said it will not cease its attacks on Israeli troops inside Lebanon and on towns in northern Israel as long as Israel continued its ceasefire violations. Under the agreement’s terms, Israel retains a “right to take all necessary measures in self-defence, at any time, against planned, imminent, or ongoing attacks”.
Reports of more deadly Israeli attacks on Lebanon despite ceasefire
Two people were killed and five others injured in an Israeli airstrike on the southern Lebanese town of Abba this morning, according to Lebanon’s state-run national news agency (NNA), which has reported muttiple Israeli attacks across the country today.
The NNA also reported that Israeli warplanes launched a series of airstrikes this morning on the towns of Yahmar al-Shaqif and Kfar Tebnit, and shellilng on the towns of Yahmar Arnoun, Nabatieh al-Fawqa and Mayfadoun.
Despite a US brokered ceasefire agreement, Israel and Hezbollah have continued with their attacks, accusing each other of violations.
Israel has been accused of violating the ceasefire agreement many times, with strikes killing civilians and homes continuing to be demolished despite the military claiming it is only targeting Hezbollah sites.
Hezbollah, the Iranian backed Lebanese militant group, reportedly said earlier that its fighters had targeted an Israeli military position in the village of Taybeh along the Israel-Lebanon border, forcing its troops to retreat.
Iranian authorities on Monday hanged a postgraduate student from a university in Tehran on charges of espionage. Erfan Shakourzadeh, 29, was hanged after being convicted for collaborating with the CIA and the Mossad, the Iranian judiciary’s Mizan Online website said.
Norway-based rights groups Iran Human Rights and Hengaw said that Shakourzadeh was a student at Tehran’s prestigious Iran University of Science and Technology and had written a message before his execution rejecting the charges as fabricated.
Describing him as an “elite student”, IHR said he was held “in solitary confinement and subjected to torture and forced to give false confessions”. He is the fifth person to be executed on espionage charges since the beginning of the US-Israeli war on Iran in late February.
The UK and France will host a multinational meeting of defence ministers involving 40 countries tomorrow to discuss military plans to restore trade flows through the strait of Hormuz, the British defence ministry said.
The UK’s defence secretary John Healey and his French counterpart Catherine Vautrin will co-chair the meeting. Healey said:
When I co-chair this meeting of nations from around the world, our job will be to make sure we are not just talking, we are ready to act.
That is why I have directed HMS Dragon to the Middle East, so Britain is in position to support this mission the moment it is needed.
This government will not stand by when instability drives up costs for British families and businesses.
The UK has already announced the deployment of HMS Dragon to the region so the destroyer can play a role in a multinational mission should the conditions allow after the US-Israel war on Iran is over.
Iran on Sunday threatened to strike British and French warships in the strait if they try to help reopen the strategic waterway.
French President Emmanuel Macron subsequently clarified that France had “never envisaged” a naval deployment but rather a security mission that would be done in coordination with Tehran.
South Korea condemns attack on cargo ship in strait of Hormuz
South Korea has condemned an attack against a cargo ship operated by a Korean shipper on 4 May in the strait of Hormuz and said it plans to respond once the source of the attack is identified.
Namu, the vessel operated by the shipper HMM Co., was not in violation of any rules in effect at the time in the waters off the UAE and it was a case of an attack against a commercial vessel that cannot be justified, the official said.
“We condemn this in the strongest terms,” Wi Sung-lac, the South Korean presidential national security adviser, told reporters.
“We’ll seek through further investigation to identify the party responsible for the attack, the exact type of projectile and its physical size.”
South Korea’s defence minister Ahn Gyu-back is due in Washington for talks with the US defence secretary Pete Hegseth on Monday.
They could possibly discuss cooperation to restore freedom of navigation through the strait of Hormuz with its effective closure raising concerns about a looming energy crisis in South Korea’s trade-dependent economy. Washington has urged its allies to help unblock the strait but has so far been met with a wall of resistance.
In response to US-Israeli attacks, Iran has effectively closed the strait to most traffic, inflicting severe economic damage around the world as the waterway usually carries about 20% of global oil shipments and significant amounts of gas and products including fertiliser.
Al Jazeera is carrying some comments from the Iranian foreign ministry spokesperson Esmail Baghaei, who is speaking about the Iranian proposal to end the war that the US has emphatically rejected.
“Demanding an end to the war, lifting the (US) blockade and piracy, and releasing Iranian assets that have been unjustly frozen in banks due to US pressure,” Baghaei was quoted as having said.
“Safe passage through the strait of Hormuz and establishing security in the region and Lebanon were other demands of Iran, which are considered a generous and responsible offer for regional security,” he added.
“Whenever we are forced to fight, we will fight, and whenever there is room for diplomacy, we will seize that opportunity,” Baghaei was also quoted as having told a news briefing earlier.
He said the US’s demands were “unreasonable” and suggested that stability in the region had been undermined by Trump’s rejection of Iran’s response to Washington’s peace proposal.
Julian Borger
The US parameters for nuclear talks reportedly included a moratorium on Iranian nuclear enrichment for up to 20 years; the transfer overseas, possibly to the US, of Iran’s stockpile of highly enriched uranium (HEU), which could be used to make nuclear warheads; and the dismantling of Iranian nuclear facilities.
According to the Wall Street Journal, the Iranian counter-proposal suggested a shorter moratorium, the export of part of the HEU stockpile and the dilution of the rest, and refusal to accept the dismantling of facilities.
The Israeli prime minister, Benjamin Netanyahu, had earlier warned the war would continue as long as Iran had a stockpile of HEU.
“It’s not over, because there’s still nuclear material – enriched uranium – that has to be taken out of Iran. There’s still enrichment sites that have to be dismantled,” he told the CBS programme 60 Minutes, according an excerpt published before its broadcast.
Asked how the HEU should be removed, Netanyahu said: “You go in and you take it out,” adding that the best way would be to enter Iran to secure the fissile material as part of an agreement. He said Donald Trump had told him he wants “to go in there”.
In a separate interview, Trump appeared to take a more relaxed view of the HEU stockpile, which the UN nuclear watchdog, the IAEA, says is buried deep under mountains in central Iran. The US president suggested that for the time being, satellite surveillance was sufficient to guarantee no one had access to it.
Trump rejects Iran response to US peace proposal as Tehran warns it is prepared to retaliate against US strikes
We are restarting our live coverage of the US-Israeli war on Iran after Donald Trump described Tehran’s response to Washington’s peace proposal as “totally unacceptable”, raising the possibility of fresh conflict.
Iran warned it would not hold back from retaliating against any new US strikes or permit more foreign warships in the strait of Hormuz.
A ceasefire meant to facilitate peace talks came into effect in Apri. It has been largely observed, despite exchanges of fire and reports of strikes in the strategic strait of Hormuz, which Iran has continued to effectively block in response to being attacked by the US and Israel in February.
The US military in turn has blockaded Iranian ports since 13 April, claiming it has turned back 61 commercial vessels and disabled four.
According to Iranian state media, Tehran’s proposal included demands that the US lift its sanctions, end its naval blockade and called for an immediate end to the war with guarantees against any renewed attack on the country.
Posting on Truth Social, Trump said: “I have just read the response from Iran’s so-called ‘representatives’. I don’t like it – totally unacceptable.”
The US had presented a peace proposal a week ago, which, as my colleague Julian Borger notes here, was reported to consist of a one-page, 14-point memorandum of understanding that would reopen the strait while setting a framework for further talks on Iran’s nuclear programme.
Trump told US outlet Axios he’d discussed the Iranian response in a phone call with his close ally, Israeli prime minister Benjamin Netanyahu. “It was a very nice call. We have a good relationship,” he said, before stressing that the Iran negotiations are “my situation, not everybody else’s.”
Netanyahu warned the war would continue as long as Iran had a stockpile of highly enriched uranium (HEU), which could be used to make nuclear warheads.
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