London open: Stocks nudge lower as Burnham victory paves way for leadership contest

(Sharecast News) - London stocks nudged lower in early trade on Friday as investors mulled Andy Burnham's victory in the Makerfield by-election, which paves the way for a leadership challenge against Prime Minister Keir Starmer.

At 0826 BST, the FTSE 100 was 0.2% lower at 10,384.53, while sterling was off 0.1% against the dollar at 1.3195. At the same time, the yield on the 10-year gilt was up six basis points at 4.82%, while the yield on the 30-year gilt was five basis points higher at 5.52%.

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."

Patrick Munnelly at Tickmill Group said: "Sterling has been relatively stable so far, but the gilt market may react more meaningfully when liquidity improves. The risk is that UK political uncertainty adds to an already persistent fiscal premium, especially if investors begin to price a less market-friendly fiscal strategy under a different Labour leadership."

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

Government borrowing rose more than expected in May, according to data 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.

Meanwhile, the US-Iran war remained in focus 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, Barratt Redrow edged 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 slid as shareholder CPPIB European Student RE Holdings placed 36.2m shares at a discount to Thursday's close.

Market Movers

FTSE 100 (UKX) 10,384.53 -0.15%

FTSE 250 (MCX) 23,261.61 -0.30%

techMARK (TASX) 5,871.41 0.63%

FTSE 100 - Risers

Babcock International Group (BAB) 1,058.00p 2.08%

BP (BP.) 494.40p 1.24%

BAE Systems (BA.) 1,862.00p 1.09%

AstraZeneca (AZN) 13,248.00p 1.02%

Informa (INF) 875.60p 0.76%

Shell (SHEL) 2,976.00p 0.76%

Unilever (ULVR) 4,420.00p 0.72%

Rolls-Royce Holdings (RR.) 1,418.40p 0.71%

Imperial Brands (IMB) 2,763.00p 0.69%

Sainsbury (J) (SBRY) 302.90p 0.56%

FTSE 100 - Fallers

Admiral Group (ADM) 3,216.00p -4.64%

London Stock Exchange Group (LSEG) 8,268.00p -1.66%

Aviva (AV.) 626.60p -1.42%

Severn Trent (SVT) 2,842.00p -1.24%

St James's Place (STJ) 1,132.00p -1.22%

Barclays (BARC) 496.60p -1.21%

ICG (ICG) 1,719.00p -1.15%

Fresnillo (FRES) 3,076.00p -1.12%

Airtel Africa (AAF) 354.00p -1.12%

Lloyds Banking Group (LLOY) 105.00p -1.08%

FTSE 250 - Risers

NCC Group (NCC) 134.00p 4.85%

Hays (HAS) 35.44p 3.37%

Aston Martin Lagonda Global Holdings (AML) 42.00p 2.64%

C&C Group (CDI) (CCR) 100.00p 2.56%

Chrysalis Investments Limited NPV (CHRY) 80.60p 2.41%

Harbour Energy (HBR) 236.40p 2.07%

Grafton Group Ut (CDI) (GFTU) 910.00p 1.86%

Baltic Classifieds Group (BCG) 192.00p 1.83%

Shawbrook Group (SHAW) 323.25p 1.64%

Diversified Energy Company (DI) (DEC) 984.00p 1.55%

FTSE 250 - Fallers

Unite Group (UTG) 509.00p -5.16%

Raspberry PI Holdings (RPI) 852.50p -3.54%

Pan African Resources (PAF) 110.00p -3.01%

Ibstock (IBST) 93.20p -2.41%

THG (THG) 31.16p -2.32%

Gamma Communications (GAMA) 894.50p -2.29%

Frasers Group (FRAS) 720.50p -2.06%

Wizz Air Holdings (WIZZ) 1,166.00p -2.02%

Cranswick (CWK) 5,360.00p -2.01%

Hochschild Mining (HOC) 564.00p -1.75%