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Sterling, Gilts Tumble as UK Political Uncertainty Intensifies

British financial markets faced headwinds Friday as investors reassessed political risk following Labour Party leadership developments. The pound and government bonds came under selling pressure amid concerns a new administration could challenge fiscal discipline and adopt a confrontational approach toward bond markets. Andy Burnham, Mayor of Greater Manchester, cleared a significant hurdle toward a potential premiership challenge when parliamentary candidate Josh Simons agreed to step aside. Burnham will now contest a by-election in Makerfield in northwest England. The move strengthens his candidacy as Prime Minister Keir Starmer faces mounting pressure following Labour's weak showing in recent local elections. Financial analysts warned that sterling and gilts could face elevated political risk premiums. President Donald Trump characterized Starmer's political survival as challenging without addressing immigration and energy policy.