Pound gains as Mahmood edges ahead for UK chancellor
Shabana Mahmood's likely appointment as UK chancellor has reassured bond markets and manufacturers wary of Ed Miliband's net zero agenda, but her lack of economic experience is alarming corporate leaders.
Shabana Mahmood is poised to become the UK’s next chancellor after Andy Burnham takes office as prime minister on Monday, a move that immediately boosted the pound and lowered government borrowing costs. Financial markets interpreted the elevation of the home secretary over energy secretary Ed Miliband as a signal that the new administration will pursue less radical fiscal policies.
The market reaction underscores the central tension facing Burnham as he builds his government. While sterling rallied and gilt yields dipped on expectations of lower borrowing, corporate Britain is scrambling to assess a politician with virtually no track record in economic policy. The Home Office reported no meetings between Mahmood and individual businesses during her tenure.
For some industrial leaders, however, her emergence is a necessary relief. A public affairs boss at a large British manufacturer said there was relief, stating "I can't see how it would work" with Miliband at the Treasury due to his net zero ambitions. Manufacturers have pressured Burnham to row back on decarbonisation targets, arguing they threaten the UK’s struggling industrial base and hinder job creation.
Yet this comfort is tempered by deep uncertainty in the boardroom. One insider at a FTSE 250 company described Mahmood as an "unknown quantity". A senior lobbyist noted that given the importance of the chancellor in setting conditions for UK firms, she "probably wouldn’t be the worst but I’d like someone who’s more dynamic and more into business".
Internal Labour criticism has been sharp. One Labour figure called her a "bizarre choice" with "no economic credentials or vision", warning it risked Treasury capture and market credibility. Senior party figures and economists warned that Mahmood lacks a serious background in economics, with some suggesting foreign secretary Yvette Cooper would be a safer compromise.
The uncertainty extends beyond the chancellor to Burnham’s wider economic team. James Purnell, a former City adviser, will serve as chief of staff, but former local government minister Miatta Fahnbulleh is not expected to remain an adviser. Furthermore, prominent economists including Jim O’Neill, Andy Haldane, and former Office for Budget Responsibility chair Richard Hughes are not expected to take formal roles.
Businesses are desperate to avoid a repeat of Rachel Reeves’s tenure, which was marred by early clashes over a £25bn hike to employers’ national insurance contributions. With Burnham’s inner circle still shifting and narrowing, executives remain in the dark about who will ultimately steer the UK economy.
