Stocks and markets to watch if Andy Burnham becomes Prime Minister

After a weekend of mounting pressure amid Burnham’s seismic by-election victory in Makerfield, Sir Keir Starmer has confirmed he is stepping down as Labour leader and Prime Minister.

Burnham, the former Mayor of Greater Manchester and self-styled ‘King of the North,’ has already confirmed he will stand for the leadership, and with Wes Streeting stepping aside to back him, he is the clear frontrunner.

Nominations open on 9 July and close before Parliament's summer recess on 16 July. If no credible challenger emerges, Burnham could be in Downing Street within weeks, though a contested race would push that timetable back to early September.

So what would a Burnham premiership mean for markets? Here are the key areas investors might want to watch.

How leadership changes typically affect UK investor sentiment

A change in prime minister without a general election tends to inject uncertainty into UK markets before sentiment stabilises once the new leader's economic direction becomes clearer.

Equity investors often wait for policy details, but bond investors tend to react much faster. The lesson from the Liz Truss mini-budget fiasco in 2022 remains clear: when markets lose confidence in a government's fiscal credibility, gilt yields can rise rapidly and create knock-on effects across mortgages, pensions and the wider economy.

Indeed, we seem to be burning through Prime Ministers faster than England goes through penalty shootout optimism.

Burnham's team will be acutely aware of this. In September 2025 he remarked that the UK had to ‘get beyond being in hock to the bond markets.’ . He later argued that this comment was taken out of context, but investors have not forgotten it.

The first few weeks of a Burnham leadership are therefore likely to be judged less by political popularity and more by whether markets believe his economic plans are credible and affordable.

Gilts, Sterling and the first market test

Before investors focus on individual stocks, the most immediate verdict on a Burnham premiership is likely to come from the gilt market.

Government bonds effectively represent a referendum on fiscal credibility. If investors believe a government is likely to increase borrowing, expand spending significantly or weaken budget discipline, gilt yields tend to rise as investors demand greater compensation for lending to the state.

That matters because higher gilt yields feed directly into mortgage pricing, government borrowing costs and corporate financing conditions. A sustained move higher would affect the entire market, not just individual sectors.

Three indicators deserve particular attention:

• 10-year gilt yields
• Sterling against the US Dollar and Euro (GBP/USD, GBP/EUR)
• FTSE 100 banking stocks including Lloyds (domestic focus)

Burnham has pledged to respect Labour's fiscal rules and has ruled out tax rises on ‘working people.’ However, his support for greater public investment, regional infrastructure spending and a larger state role in utilities means investors will closely scrutinise how any new spending commitments are funded.

A modest rise in yields would not necessarily be negative. Markets are often willing to support borrowing if it is tied to investments that improve long-term productivity and economic growth. The risk emerges if investors conclude that spending ambitions are outpacing funding plans.

For that reason, Burnham's choice of Chancellor may become the most important market event of the leadership transition.

Sectors and stocks to watch

Northern infrastructure

This is arguably where Burnham's fingerprints are most distinctive.

His decade as Mayor of Greater Manchester produced one of the UK's most successful devolution stories, with major regeneration projects, expanded transport networks and substantial private-sector investment flowing into the region. The extent to which the success was his is debatable, but the success itself is not.

His most eye-catching infrastructure proposal is reviving the northern leg of HS2 between Birmingham and Manchester, which was cancelled in 2023. Burnham has suggested that a public-private partnership model could make the project financially viable.

That could create opportunities for major contractors involved in rail and infrastructure projects, including Kier Group, Morgan Sindall and Balfour Beatty.

Burnham is also a committed advocate of devolution. If more spending decisions move from Whitehall to combined authorities and metro mayors, businesses with strong regional relationships and established local authority frameworks could gain an advantage.

Green energy and utilities

Burnham has been unusually explicit about his ambitions for utilities and energy, noting publicly that he put buses ‘back under public control with the £2 fares, so you take that principle and apply it to energy and apply it to the water; that’s what I think we need to do.’

That stance has already unsettled investors.

Water companies including Severn Trent, United Utilities and Pennon Group came under pressure earlier this year as Burnham's leadership prospects improved. While full-scale nationalisation would be expensive and politically challenging, investors are increasingly pricing in the risk of tighter regulation, lower returns and greater government intervention.

Energy companies face similar uncertainty.

When Great British Energy was first proposed, shares in firms such as Drax and Centrica reacted negatively amid concerns about increased state involvement in the sector. A Burnham government would be unlikely to reverse those plans and could potentially expand them, particularly as this could attract the support of Ed Miliband, a key potential rival.

SSE occupies an interesting middle ground. Its large renewable energy pipeline could benefit from increased public investment, but it may also find itself competing with a more ambitious state-backed energy operator.

For long-term investors, the biggest issue may be policy uncertainty. Political intervention often depresses sector valuations even when the most aggressive proposals never become law.

Housebuilding

Housing sits at the heart of Burnham's political pitch.

His record in Greater Manchester has focused heavily on regeneration, affordable housing and using planning powers to drive development. A Burnham government would likely seek to replicate that approach nationally.

Vistry Group appears well-positioned for this environment given its focus on affordable and partnership housing developments. Mears Group could also benefit from increased investment in social housing management and maintenance.

The picture is more mixed for traditional volume builders such as Barratt Redrow, Taylor Wimpey and Persimmon.

Planning reform and faster approvals could unlock more development opportunities and increase build volumes. However, stronger affordable housing requirements and greater emphasis on community benefits could place pressure on profit margins.

Investors should also monitor any discussion of land value taxation or new mechanisms designed to capture development gains for public spending. Currently, housebuilding appears to be stalling with higher interest rates; political support combined with falling rates could be a powerful combination for a sector-wide recovery, though this remains speculative.

Defence

Defence appears likely to remain one of the more stable sectors under a Burnham government.

He has not challenged Labour's commitment to raise defence spending to 2.5% of GDP, and current geopolitical tensions make any reversal politically difficult.

That leaves BAE Systems and Babcock International among the clearest beneficiaries of continued defence spending growth.

It’s worth considering that the resignation of John Healey and Al Carns as Defence Secretary and Armed Forces Minister respectively contributed to Starmer’s exit, and significant investment into Sovereign AI capabilities among other themes could be in the offing as an olive branch to the department.

QinetiQ is a less obvious name worth watching. The company provides testing, evaluation and training services and could benefit from sustained increases in defence budgets regardless of which political faction leads Labour.

Sectors that could face headwind

North Sea oil and gas

Few sectors appear less likely to benefit from a Burnham premiership than North Sea oil and gas.

Burnham is unlikely to take a more industry-friendly position than Starmer and may ultimately support a greater public role in energy infrastructure.

The windfall tax is therefore unlikely to disappear. Companies including Harbour Energy, which have already scaled back UK investment, could remain under pressure if investors conclude that the fiscal environment will remain challenging. As usual, smaller North Sea operators and explorers remain particularly exposed to regulatory and taxation uncertainty.

For investors seeking UK energy exposure, renewables and infrastructure may offer a more favourable policy backdrop than traditional upstream oil and gas.

However, while the outgoing government pledged no new oil and gas licences (but while allowing production from existing fields to continue), The Telegraph recently reported that Burnham has said he is ‘open-minded’ about expansion.

It could be that going after additional tax revenue and increased energy security, particularly if ringfenced to pay for the green transition, will win the argument.

Private Equity

Burnham's political instincts are generally less favourable toward private ownership of essential infrastructure and public services.

His support for public control of utilities, land value capture mechanisms and greater regulation of critical services creates a potentially less attractive environment for private equity investors.

Listed private equity firms such as 3i Group and Intermediate Capital Group are unlikely to face direct policy action. However, the broader political climate could weigh on sentiment, particularly for investments linked to public services, infrastructure and utilities.

The ongoing crisis at Thames Water may also accelerate debates around ownership structures in regulated industries.

The Caveat

Markets have been pricing in Burnham's rise for several weeks.

The weakness seen in utility stocks during May and again after the Makerfield result suggests investors have already started adjusting portfolios to reflect the possibility of a Burnham government.

However, that does not mean the market reaction is complete. The most important developments are still ahead, including Burnham's leadership victory, his choice of Chancellor and the contents of his first fiscal statement.

Ultimately, markets care less about campaign rhetoric than implementation. If Burnham can convince investors that his infrastructure, housing and regional investment ambitions can be delivered within a credible fiscal framework, many concerns could fade quickly. On the other hand, this will require political skill and a delicate balancing act.

The deeper opportunity may lie elsewhere. UK domestic stocks have spent years trading at a discount to international peers amid political uncertainty and weak economic growth. A new government with fresh momentum could help unlock a long-awaited re-rating of domestically focused UK companies, particularly those within the FTSE 250.

As ever, political transitions create both risks and opportunities. The challenge for investors is determining which sectors stand to benefit from change, and which may become casualties.