(Investorideas.com
Newswire) a go-to platform for big investing ideas, including AI
and tech stocks issues market commentary from deVere Group.
The Peter Mandelson crisis could trigger UK bond market chaos if it
forces Prime Minister Keir Starmer out of office, warns the CEO of
one of the world’s largest independent advisory organizations.
The warning from Nigel Green of deVere Group comes as reports
suggest even close allies of the Prime Minister are now questioning
his judgement and authority, raising the risk that a political
scandal could rapidly morph into financial volatility.
Pressure intensified after police confirmed a criminal investigation
into Peter Mandelson over allegations of misconduct in public
office, following claims he passed market-sensitive government
information to Jeffrey Epstein while serving as business secretary
in 2009.
The Prime Minister has since acknowledged that Mandelson
“lied repeatedly” during the vetting process prior to
his appointment as US ambassador, as the government struggles to
contain the fallout from the release of vetting files.
For investors, the issue is no longer just the scandal itself, but
what it reveals about leadership judgement and control.
Nigel Green says the market risk becomes acute if the crisis
escalates into a leadership collapse.
“If the Mandelson affair brings down the Prime Minister,
which is something a growing number of commentators are
discussing, the consequences would not stop at Downing
Street,” he says. “Markets would immediately focus on
the UK bond – or gilt – market.”
He argues that Rachel Reeves is far more politically and
economically tied to Starmer than many assume, making her position
vulnerable in the event of a sudden leadership change.
“Rachel Reeves’ credibility with bond markets has been
built on one core thing: continuity.”
“She’s consistently positioned herself as a guardian
of fiscal discipline, clear rules, and predictability,
particularly after the gilt market turmoil of recent years,
especially during the Truss mini-Budget drama.”
He notes that Reeves earned market confidence by explicitly
distancing Labour from unfunded spending promises, committing to
strict fiscal rules, and signalling respect for the independence of
economic institutions.
Those assurances helped anchor expectations among gilt investors
already sensitised by past policy shocks.
“This credibility is derived from the authority of the
Prime Minister who empowered her and enforced discipline around
the economic message.”
“Investors see Starmer and Reeves as a single
framework.”
If that framework fractures, continuity becomes fragile.
“In the event of a sudden leadership change, it would be
extremely difficult for a successor to keep the Chancellor in
place without appearing constrained by the previous
leadership,” explains the deVere CEO.
“History teaches us that new leaders, especially those
emerging from crisis, almost always want to reset the economic
narrative.”
For bond markets, that prospect is destabilising.
“UK gilts are priced on confidence that fiscal policy is
predictable, rules-based, and controlled,” comments Nigel
Green.
“Any suggestion that the Chancellor could be replaced
abruptly forces investors to reassess debt issuance plans,
spending priorities, and the credibility of medium-term fiscal
guidance all at once.”
He stresses that the bond market reaction would not likely wait for
formal decisions.
“Gilt investors remember how quickly yields can spike when
fiscal credibility is questioned,” he says.
“They’re conditioned to react early, not wait for
clarity.”
In that context, even speculation around a leadership contest
combined with uncertainty over the Treasury would raise risk premia.
“A leadership vacuum paired with doubts about who controls
the purse strings is a toxic mix for bonds.”
“Ambiguity is punished faster than almost anything
else.”
However, he cautions that markets will not move on conjecture alone.
“This remains a conditional risk,” he says.
“Momentum matters.”
What would change the calculus is visible political fragmentation.
“If discipline frays, if senior figures brief against each
other, or if polling shows confidence in leadership judgement
cracking, markets will likely respond rapidly,” says Nigel
Green.
The broader lesson, he adds, is structural.
He concludes: “Should political authority weaken and the
futures of the Prime Minister and, therefore, Chancellor come into
serious doubt, bond markets will likely not wait for
reassurance.”
