The markets and UK political risk

Citywire’s Julian Bovill asked Chris Wyllie, our Chief Investment Officer for his thoughts on market reaction to recent political machinations in the UK and what a new prime minister may mean as we move into the second half of the year.

This article was first published by Citywire New Model Adviser on 24th June 2026.

‘Markets are underestimating UK political risk’ – Connor Broadley CIO

Chris Wyllie said his outlook on the UK was negative and that the markets are under-pricing the political instability that could follow Keir Starmer’s resignation.

The chief investment officer (CIO) of London advice firm Connor Broadley has said the market is ‘underestimating political risk’ in the UK, following the resignation of prime minister Keir Starmer on Monday.

‘We have been circumspect about the [political] risk and gilts for a little while now, based on the deteriorating political situation,’ Chris Wyllie (pictured), who runs portfolios for the advice firm, said.

‘It was only a couple of years ago we felt things were looking a wee bit brighter, and that Britain could go to actually be seen as a place of relative political stability.

‘Unfortunately, it hasn’t played out that way. I think the markets are underestimating the political risk now.’

Markets have been largely steady this week in response to Starmer’s resignation on Monday, although gilt yields remain at historically high levels, with the 10-year gilt at 4.74%.

Starmer’s resignation has paved the way for his likely successor, former Greater Manchester mayor Andy Burnham, who is widely expected to become the new prime minister in the next few weeks.

Investors are now turning their attention to Burnham, to determine what his fiscal policy could look like.

‘Talk is that people do not know what Burnham stands for, but from what I’ve read, I think you can pick out his core beliefs,’ Wyllie said.

‘He’s a social democrat, and he talks essentially about pro-business socialism. Burnham clearly hails from the left and he has said some pretty radical things in the past. Either the markets are not listening, or they feel they have bigger fish to fry.’

In recent months, Connor Broadley has cut back fund allocation to UK mid and small cap equities, Wyllie said.

‘With a heavy heart, we moved out of mid and small cap a while ago, which are really the stocks that are exposed to the country. We still hold FTSE companies, but ultimately they are global institutions,’ he said.

Wyllie cautioned the UK outlook could deteriorate from here if taxes rise again.

‘If they start raising taxes and there is already no growth, then the Bank of England will have to start cutting rates.’