UK PM Starmer may be engineering an economic recovery he won’t be around to enjoy

Key topics:Starmer faces political turmoil despite signs of economic recovery.UK consumer spending, business optimism, and housing show green shoots.BOE warns growth muted; leadership crisis poses biggest economic risk..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Irina Anghel.Things ought to be looking rosy for Prime Minister Keir Starmer, who began the year begging a dissatisfied public to judge him on his ability to turn around the UK economy. British consumers are opening their wallets again. Businesses are at their most optimistic in 17 months. House prices are bouncing back to new all-time highs. And the Bank of England expects inflation to return to its 2% target this spring, thanks to measures announced in the November budget. Economists even talk of a long-elusive productivity revival. Yet none of that is working in the leader’s favor. On Monday Starmer pulled his premiership back from the brink when cabinet colleagues turned out to give him their backing — a much-needed reprieve after 24 hours in which his most senior aide quit and the leader of his party in Scotland called for him to step down. .Read more:.Starmer faces fight for survival after key adviser steps down.While that show of support buys him time, it’s not the last of the imminent trip-hazards for a leader whose personal approval ratings are at rock bottom. Nor does opinion polling suggest any incipient economic recovery is resonating with the electorate. About one in five voters rate the Starmer government better at economic management than its rivals, down from a third soon after their 2024 election win, according to YouGov polling..With the scandal around Starmer’s appointment of Peter Mandelson still raging, and ballot-box tests at which Labour is expected to perform poorly just round the corner, Starmer has pacified colleagues casting around for someone to replace him — for now. No. 10 officials grumble that their successor will be handed a strong economic legacy to boast of, according to people familiar with the matter.BRC figures out Tuesday showed retail sales grew 2.7% in the year to January — the strongest increase in five months — which will help shops recover after a disappointing Christmas. Discretionary categories like personal electronics, furniture, and children’s toys were among the best performing, suggesting that consumers are ready to spend again. S&P’s private sector reports showed businesses enjoying a bounce-back in new work at the start of the year. Even home builders are becoming more hopeful of a turnaround. While building activity continued to contract in January, it did so at the slowest pace in seven months, S&P said. The improving demand picture is also helping the jobs market stabilize, with employers starting to take action on hiring plans, according to the latest report by the Recruitment and Employment Confederation..It remains to be seen whether these green shoots will translate into growth longer-term. This month BOE policymakers painted a more pessimistic picture of the economy than in November, downgrading this year’s growth rate to 0.9% from 1.2%. And there is a long distance for any recovery to travel, after Starmer’s first 18 months in office were marked by uncertainty for British firms. The country lost almost a quarter of a million jobs after Chancellor of the Exchequer Rachel Reeves increased payroll costs in her first, October 2024 budget. Higher taxes and sticky inflation swiftly dented both business and consumer sentiment, meaning weak investment and low spending despite the country’s high savings rates. And Labour’s promise to build 1.5 million homes is looking less and less unattainable..Read more:.UK leader Starmer is cursed with the reverse Midas touch: Martin Ivens.Gross domestic product data for the final three months of 2025 out Thursday are expected to confirm the economy finished the year with muted momentum. Still, recent surveys indicate both businesses and consumers are starting to turn a corner. Reeves avoided broad-based cost increases at her most recent fiscal event, and delayed the introduction of some of the personal tax rises she has threatened until later in the parliament..Ultimately, the most immediate risk to the UK’s growth revival is not a cautious consumer mood or weak business investment, but Starmer’s political crisis. “In the case that a leadership election is triggered, expect sterling to weaken and government bond yields to rise,” warned Kallum Pickering, chief economist at Peel Hunt. For now, backbenchers are toeing the line, at least in public. “We are UK Plc. We want people to come and invest and live and thrive in the UK,” Labour MP Tonia Antoniazzi told RTE Radio on Monday. “I don’t think change in prime minister will solve anything.”.© 2026 Bloomberg L.P.

UK PM Starmer may be engineering an economic recovery he won’t be around to enjoy

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