Britain’s borrowing costs rise as pressure mounts on Prime Minister Keir Starmer

UK bond yields rose on Thursday as Prime Minister Keir Starmer came under renewed pressure to resolve a scandal surrounding former British ambassador to the US Peter Mandelson’s ties to a disgraced financier. Jeffrey Epstein.

By 9.44am London time on Thursday, the UK 10-year gilt yield, or interest rate, was up 3 basis points at 4.575% amid reports of growing discontent among Labor lawmakers over Starmer’s appointment of Mandelson as ambassador in February 2025.

Documents and emails released by the U.S. Department of Justice in recent weeks and months have shed new light on Mandelson’s relationship. sex offender EpsteinHow their friendship continued despite Epstein’s 2008 conviction for child prostitution.

Starmer told parliament on Wednesday that Mandelsohn had been misled about the “sheer depth and extent” of his relationship with Epstein, but the contacts were revealed during an investigation before his appointment.

“He lied to my team several times before and during his time as ambassador when asked about his relationship with Epstein. I regret appointing him,” Starmer said, adding: “Had I known what I know now, he would never have been in government.”

Mandelson sought to distance himself from Epstein, who was killed in 2019 while in federal custody on child sex trafficking charges. He said earlier this year that he regretted “knowing Epstein.”

Mandelson resigned from the Labor Party earlier this week. Starmer removed him as ambassador in September.

This is the latest challenge facing Starmer after the policy change economic anemia and slide in survey has already put pressure on his prime ministership.

Eurasia Group, a political analysis firm, estimates that the odds of a rival leadership bid and Starmer stepping down this year are up from 65% to 80%.

“Keir Starmer is fighting for his political life amid the deepest crisis his prime minister has ever faced,” Eurasia Group managing director for Europe Mujtaba Rahman said in a note on Thursday, describing Mandelson’s appointment as UK ambassador as a “disastrous decision”.

Rahman said a disgruntled Labor party planned to delay any move against Starmer until after local snap elections on February 26 and the wider and more important regional elections on May 7, but were “not sure he can hold on much longer”.

“Although Starmer may have survived in the short term, the Mandelson case has caused him irreparable damage. Some Labor MPs described it as a ‘tipping point’ while others described it as ‘the last straw’, Rahman said.

81 Labor MPs are needed to trigger a party leadership election.

“While the prime minister insists she will fight any challengers, the current crisis raises the possibility that Starmer will fall on his sword if his opponents muster 81 lawmakers,” Rahman said.