London midday: FTSE a little weaker, gilt yields up after Burnham by-election win

(Sharecast News) - London stocks were still a little lower by midday on Friday as gilt yields rose after Andy Burnham won the Makerfield by-election, paving the way for a leadership challenge against Prime Minister Keir Starmer.

The FTSE 100 was 0.2% lower at 10,376.68 , while sterling was up 0.2% against the dollar at 1.3227, reversing earlier losses. At the same time, the yield on the 10-year gilt was up eight basis points at 4.84%, while the yield on the 30-year gilt was seven basis points higher at 5.53%.

Burnham comfortably won the by-election, defeating Reform UK's Robert Kenyon and securing a seat in parliament. "Everyone knows that politics isn't working," he said in his acceptance speech. "Tonight could, just could, be the turning point."

Burnham, who could now trigger a leadership challenge as early as next week, will need the support of at least 81 Labour lawmakers.

Susannah Streeter, chief investment strategist at Wealth Club, said: "There has been no Burnham bounce for UK assets following Labour's victory in the Makerfield by-election, but equally there has been no battering from uneasy investors. Financial markets are taking the political developments largely in their stride. It's been more of a 'meh' reaction as investors appear to have got used to political shenanigans at Westminster and appear to have already factored in the likelihood of a leadership challenge."

Pointing to the "muted" moves in sterling and bonds, Streeter said they suggest investors are still weighing up what the result means for the future direction of economic policy. "For now, that may be because Andy Burnham has promised to be more cautious about spending by largely sticking to fiscal rules. He also appears willing to tackle the large benefits bill, arguing that welfare reform should focus on helping more people into work.

"His pledge to bring down huge welfare costs, partly to fund higher defence spending, is a signal that he is positioning himself closer to the political centre, which may be providing some reassurance."

Investors were also mulling the latest retail sales and borrowing figures.

Government borrowing rose more than expected in May, according to figures released by the Office for National Statistics.

Borrowing - the difference between total public sector spending and income - came in at �23.3bn, up �5.4bn on May 2025 and �5.6bn more than the �17.7bn forecast by the Office for Budget Responsibility.

Borrowing in the financial year to May 2026 was �46.3bn. This is �8.9bn more than in the same period a year earlier, and �7.7bn more than the �38.6bn forecast by the OBR.

The ONS said central government debt interest payable was �11.7bn last month, up �4.1bn on May 2025 and the highest in any May on record.

Tom Davies, senior statistician at the ONS, said: "Borrowing in the first two months of the financial year was nearly �9 billion higher than the same period of 2025.

"Spending on debt interest, public services, investment and benefits all increased in May 2026, compared with last May, more than outweighing higher tax receipts."

Nabil Taleb, economist at PwC UK, said: "This month's borrowing figures offer little reassurance, and the public finances are unlikely to feel much relief while inflation risks remain live. With energy-driven price pressures still a risk, the Bank of England has so far kept the Bank Rate at 3.75%, underlining the prospect of borrowing costs staying higher for longer.

"That matters because elevated rates feed through into debt-servicing pressures - which are already high - limiting the Chancellor's room for manoeuvre while financing conditions remain tight. In that sense, the challenge is not just the level of monthly borrowing, but how quickly those financing conditions genuinely ease."

Separate data from the ONS showed retail sales rose more than expected in May, helped along by warm weather and promotions. Retail sales ticked up 1.2% following a 1% decline in April, coming in comfortably ahead of analysts' expectations for a 0.5% increase. Over the year to May, sales were up 3.2%.

The ONS said retailers suggested that promotions and the hot weather in May increased sales volumes for non-store retailers and department stores.

The US-Iran war remained in focus on Friday as it emerged that scheduled talks between the two in Switzerland have been called off. Switzerland's foreign ministry said the talks would not proceed as planned, while the White House said US Vice President JD Vance would no longer be going to Switzerland.

"The plans for the upcoming technical talks have not been finalised, and the US delegation has been prepared to depart at the first available opportunity," a White House spokesperson said.

In equity markets, Babcock was among the top performers on the FTSE 100 ahead of full-year results on Monday.

Barratt Redrow nudged lower as it appointed former Britvic and British Airways executive Rebecca Napier as chief financial officer with effect from 3 August.

PPHE Hotel Group slumped as it said Fattal Hotel Group's 2,200p-a-share offer would no longer go ahead due to opposition from one of its major shareholders. However, it also said it had received a separate earlystage approach from another party which was now being assessed.

Admiral was under the cosh after RBC Capital Markets downgraded the shares to 'sector perform' from 'outperform' as it took a more cautious view ahead of first-half results in August.

Unite Group fell after shareholder CPPIB European Student RE Holdings placed 36.2m shares in the company at a discount to Thursday's closing share price.

Market Movers

FTSE 100 (UKX) 10,376.68 -0.22%

FTSE 250 (MCX) 23,177.67 -0.66%

techMARK (TASX) 5,845.90 0.19%

FTSE 100 - Risers

BP (BP.) 499.60p 1.71%

Informa (INF) 875.40p 1.48%

Babcock International Group (BAB) 1,042.50p 1.31%

Shell (SHEL) 2,998.00p 1.23%

AstraZeneca (AZN) 13,280.00p 1.11%

Relx plc (REL) 2,371.00p 1.06%

The Sage Group (SGE) 811.00p 0.92%

GSK (GSK) 1,934.00p 0.70%

Convatec Group (CTEC) 207.20p 0.68%

Experian (EXPN) 2,523.00p 0.64%

FTSE 100 - Fallers

Admiral Group (ADM) 3,194.00p -5.00%

Airtel Africa (AAF) 342.80p -4.08%

Fresnillo (FRES) 3,018.00p -3.08%

Antofagasta (ANTO) 4,037.00p -3.07%

Anglo American (AAL) 3,894.00p -2.53%

Vodafone Group (VOD) 106.40p -1.89%

Glencore (GLEN) 556.10p -1.77%

Weir Group (WEIR) 2,456.00p -1.76%

Lloyds Banking Group (LLOY) 104.30p -1.65%

International Consolidated Airlines Group SA (CDI) (IAG) 455.40p -1.53%

FTSE 250 - Risers

Ceres Power Holdings (CWR) 598.50p 3.93%

Ithaca Energy (ITH) 228.90p 2.74%

XPS Pensions Group (XPS) 318.00p 2.58%

Harbour Energy (HBR) 236.40p 1.98%

Renishaw (RSW) 5,145.00p 1.58%

Hikma Pharmaceuticals (HIK) 1,468.00p 1.17%

Telecom Plus (TEP) 955.00p 1.06%

Spire Healthcare Group (SPI) 218.00p 0.93%

Oxford Nanopore Technologies (ONT) 115.40p 0.87%

Marshalls (MSLH) 144.00p 0.84%

FTSE 250 - Fallers

PPHE Hotel Group Ltd (PPH) 1,676.00p -15.00%

Pan African Resources (PAF) 107.00p -5.31%

Unite Group (UTG) 512.00p -3.47%

Abrdn (ABDN) 225.20p -2.93%

Frasers Group (FRAS) 712.00p -2.82%

Ocado Group (OCDO) 181.80p -2.78%

Vistry Group (VTY) 245.80p -2.54%

Endeavour Mining (EDV) 4,075.00p -2.46%

Wizz Air Holdings (WIZZ) 1,160.00p -2.43%

Man Group (EMG) 292.20p -2.41%