Pound Falls Against Dollar Amid Political Uncertainty in Britain

LONDON: The British pound weakened against the U.S. dollar as political uncertainty in the United Kingdom weighed on business confidence and economic activity.

Investors have adopted a cautious approach following the resignation of Prime Minister Keir Starmer, with attention now focused on the selection of a new national leader. Recent economic data showed that the pace of business growth in the UK has slowed to its lowest level in the past 14 months.

Although the transfer of power is proceeding peacefully, uncertainty continues to cloud the political landscape. Andy Burnham, who secured a decisive victory by more than 9,000 votes against the Reform Party in the Macclesfield by-election, has emerged as the frontrunner in the race to become the next prime minister. His main rival, Wes Streeting, has withdrawn from the contest and announced his support for Burnham.

Financial analyst Tommy Win Brossman said Burnham’s path to the premiership now appears clear, helping to reassure markets to some extent. However, economists say investor attention has shifted to the question of who will be appointed as the next Chancellor of the Exchequer.

Market analysts believe the leading candidates are experienced enough to avoid a repeat of the 2022 financial turmoil during the tenure of former Prime Minister Liz Truss, when the pound plunged to record lows.

According to figures from the betting platform Polymarket, Wes Streeting has a 70 percent chance of becoming the next finance minister, while Ed Miliband’s chances stand at around 20 percent. Francesco Pesole, a strategist at ING, said financial markets view Streeting as a more business-friendly choice than Miliband.

Meanwhile, economic surveys indicate that the incoming prime minister will inherit a stagnating economy. Business activity recorded its sharpest decline since April 2025, reflecting the impact of political uncertainty on confidence and investment.

Data from S&P Global’s Purchasing Managers’ Index (PMI) showed that the combined manufacturing and services index fell from 49.7 to 49.4, signaling continued economic weakness. Rob Wood, Chief Economist at Pantheon Macroeconomics, said political uncertainty during June had significantly undermined business confidence.

According to a Reuters report, British businesses are likely to remain cautious in the coming months until a clearer picture emerges regarding Andy Burnham’s economic policies and the direction of the new government.