As Andy Burnham prepares to enter No 10, FStech Group Editor Jonathan Easton canvasses reaction from across the City, gauging whether his devolution-and-housing agenda can reassure financial decision makers, and whether it does enough to blunt the appeal of Reform UK.

In a speech delivered days after being sworn into parliament, Andy Burnham, the MP for Makerfield and presumptive successor to prime minister Sir Keir Starmer, set out an agenda for revitalising Britain built on housing, devolution and a rejection of trickle-down economics.

The plan, part of what he has billed as a 10-year mission to raise living standards, centres on building millions of new homes, handing greater power over social housing, welfare and education to regional mayors, and bringing key utilities back under greater public control.

Burnham has been careful to frame this ambition within existing fiscal rules, promising his agenda will be "backed by sound public finances." Whether that reassurance holds is likely to shape how markets, business leaders and the City respond to him in the months ahead, particularly as speculation continues over who he will appoint as chancellor.

The scale of the agenda, paired with Burnham's popular appeal as the self-styled King of the North, has been read by some as a credible answer to the right-wing populist momentum built by Reform UK.

The City's own reaction, however, has been considerably more mixed, ranging from cautious welcome to open scepticism over tax, investment and delivery.

In this piece, FStech gauges the financial sector's response to the incoming prime minister: what he represents to the City, and whether his agenda goes far enough to reassure the markets and businesses who will ultimately decide whether his mission succeeds.

What has Burnham actually proposed?

Burnham's speech, delivered at the People's History Museum in Manchester, rested on four main pillars.

The first is devolution. Rather than regions applying to Whitehall for extended powers, Burnham wants to devolve tax, skills and industrial powers to mayors by default, backed by a new No 10 hub based in Manchester. He has also floated a German-style Basic Law, guaranteeing a statutory right to equal living standards across the country, an idea he first raised in his book Head North.

Sean Bannister, head of tax at Edwin Coe LLP, argues the proposals go well beyond a simple transfer of power. "Andy Burnham in power would likely lead to a fundamental reshaping of how the UK economy is managed in a more interventionist manner, and that means some pretty significant implications in how investment is encouraged and how wealth is taxed," he says.

"Greater fiscal powers for regions could mean different approaches to taxation, investment incentives and economic policy across England. That clearly creates opportunities for regions to compete and innovate, but at the same time risks adding complexity for businesses operating nationally if the framework is not carefully designed."

The second pillar is public ownership. Burnham wants to extend greater public control over water, energy and transport, pointing to Greater Manchester's bus franchising model as a template. The future of Thames Water, which ministers must soon decide whether to place into a special administration regime or hand to its bondholders, is likely to be an early test of how far this ambition extends in practice.

Third is housing. Burnham has pledged the biggest council house building programme since the postwar period, framing the loss of almost 1.5 million council homes since the 1980s, and the equivalent rise in social housing waiting lists, as both a social failure and a drag on the public finances, given the scale of taxpayer support currently flowing to private landlords.

Finally, and most significant for the City, is his fiscal positioning. Burnham has explicitly rejected trickle-down economics, but has been careful to pledge that all of this will be delivered within the discipline of the current fiscal rules, an attempt to reassure bond investors that a change of prime minister will not mean a change of fiscal direction.

That reassurance has landed, at least provisionally, with some in the investment community. Adam Hoyes, senior asset allocation analyst at Rathbones, says Burnham's emphasis on "sound public finances" was a welcome development for gilt investors who had feared he would loosen fiscal policy on entering No 10, though he cautions that the market is withholding judgement until more detail emerges. "We won't be drawing any big conclusions on how a change in Number 10 affects the outlook for the UK economy until we have more detail on Burnham's plans," he says.

Notably absent from the speech was any substantial reference to artificial intelligence or the role of technology and online retail in reshaping the high street, despite a pledge to reform business rates to support pubs and other high street businesses. He has also yet to appoint a chancellor, a decision the City is watching closely, given how much of his agenda's credibility rests on who is chosen to deliver it.

The backdrop he inherits

Whatever the merits of Burnham's plans, he takes office against a difficult set of numbers. Official data published by the Office for National Statistics show real household disposable income, a closer proxy for living standards than GDP alone, fell by 0.5 per cent under Starmer's premiership, even as real GDP per head rose by 1.6 per cent. Unemployment climbed from 4.1 per cent to 4.9 per cent over the same period, equivalent to around 300,000 more people out of work, while the number of young people not in education, employment or training has passed one million, its highest level in more than 12 years.

The tax burden has continued to climb throughout, and is on course to rise from around 32 per cent of GDP in 2010 to an estimated 38.5 per cent by 2031.

Analysis from the Resolution Foundation suggests real household disposable income will grow by less than one per cent a year for the remainder of this parliament, making it likely to be the second-worst parliament for living standards growth on record, better only than the pandemic-era parliament that preceded it.

For some in the business community, the more pressing issue is not any single policy but the wider pattern of instability that has preceded Burnham's arrival. Mark Smith, UK managing director at Ayming, says businesses are looking for predictability above all else. "Businesses desperately need some stability. Not only are we getting a new prime minister, but also probably a new chancellor too, which raises questions about what happens to existing policies," he says.

"Investment cycles often take place over five or ten years, so firms need confidence that the environment they are operating in will remain broadly stable. Predictability may sound dull, but it is one of the most important foundations for growth."

Scott Dawson, chief executive of Decta, frames the same concern in terms of the UK's international reputation. "The resignation of Keir Starmer underlines what the UK's business community has been saying for some time: the country needs stability, and a major part of that comes from having a steady hand at the rudder," he says, pointing to the frequency of prime ministerial turnover in recent years as a signal to overseas investors. He argues Burnham's central task will be to reverse that perception by focusing on living standards and public services rather than simply outlasting his predecessors in office.

Not everyone sees a larger state role as the wrong response to this backdrop. Dr Valentin Boboc, senior economist at the Institute of Economic Affairs, welcomes Burnham's instinct to push decision-making away from Whitehall, while questioning whether the substance will match the rhetoric.

"Andy Burnham is right that growth cannot be legislated into existence from Whitehall. His call for a more streamlined state, with decisions pushed towards local governments, is welcome," he says. "The question is whether we are willing to give local governments responsibilities as well as powers, together with regulatory independence. If devolution means handing out funds whilst keeping everything else bound by the same rules, it won't make a material difference to the obstacles to growth we currently face."


The windfall tax question

Nowhere has the City's reaction been sharper than on tax. Burnham has been warned that backing calls from the TUC for a windfall tax on bank profits, which range from restoring the bank surcharge from 3 per cent to 8 per cent, through to a maximum proposal of 35 per cent, could trigger an exodus of bankers from London.

Andy Donald, director of communications at UK Finance, argues the sector is already heavily taxed relative to competitor jurisdictions. "Tax increases of the kind proposed by the TUC would run counter to the government's aim of strengthening the financial services sector, reduce our competitiveness and risk a shift of capital, investment and jobs to other jurisdictions," he says, noting the UK banking sector paid more than £43 billion in tax last year and supports close to 400,000 jobs nationwide.

The City of London Corporation has taken a similar line, going further to call for the surcharge's removal altogether rather than simply opposing an increase.

The TUC, however, argues the sector can comfortably absorb more. General secretary Paul Nowak points to record bank profits and bonuses as justification. "Our big four banks in this country are making something like a billion pounds in profits every single week," he says. "I don't think it's unfair to ask those with the broadest shoulders to help out families who are going to struggle with heating bills."

Several of the City's own voices see a middle path. Alessandro Hatami, FinTech expert and managing partner at Pacemakers, argues the scale of any change matters more than the principle. "At the upper end of the TUC's proposals, the increase would materially affect the UK's competitiveness," he says. "Restoring the surcharge from 3 per cent to 8 per cent would be more readily absorbed, but a much larger windfall-style levy risks making the UK look unpredictable precisely when it is competing for international investment."

Simon Heath, partner at the Heligan Group, reaches a similar conclusion, noting the surcharge was cut from 8 per cent in the first place. "Given the public finance challenges, then reverting to 8 per cent for a temporary period is not unreasonable, and likely to have limited impact," he says, though he warns the TUC's higher proposals "will make the UK FS uncompetitive and have severe ramifications."

Devolution: opportunity or fragmentation?

Burnham's devolution agenda draws a similarly split response. Arjun Kumar, co-founder and co-chief executive of Taxd.co.uk, sees genuine long-term upside alongside short-term complexity. "For financial services firms operating across multiple regions, devolved tax powers would introduce something the UK has never had at scale: a postcode dimension to tax planning," he says, comparing the potential shift to the US state tax model. But he argues devolved fiscal levers could also "create genuine competition between regions for talent and investment," citing Texas and Florida as a precedent for how lower regional taxes can drive economic rebalancing.

Heath points to a precedent closer to home already under way. "Large financial institutions have moved a lot of back office away from the city, for example, HSBC and Goldman Sachs have decentralised offices in Birmingham, and government could follow suit," he says, though he cautions against "building in inefficiencies just for the sake of decentralisation."

The risk most commonly raised is fragmentation. Hatami warns that firms operating nationally "will not want to navigate a patchwork of local taxes, incentives and administrative requirements," arguing devolution "works best when regions have meaningful economic powers within a consistent national regulatory and tax framework."

Does this come at London's expense?

Here the City's voices diverge most clearly. Hatami sees a real risk that redistributing investment could weaken London's global standing. "Relocating financial hubs may bring a small benefit to regional UK markets but it will also potentially make London less relevant, an issue made very visible post-Brexit especially," he says.

Heath takes the opposite view, arguing London's concentration of financial infrastructure is effectively unshakeable. "It is a misnomer to believe that the City is likely to be significantly impacted by any government policy for redistribution of power," he says, pointing to similar warnings made ahead of Brexit that ultimately did not materialise.

Not all the concern is about firms rather than individuals. Keri-ann Osfield, chief financial officer at Multrees Investor Services, argues the debate over wealth taxation carries risks beyond the individuals directly affected. "A minority of wealthy individuals are leaving, or looking seriously at the exit, because they feel the tax environment has become too punitive," she says.

"If policymakers push too hard, the impact will not be limited to the individuals leaving. It will be felt by the advisers, managers, professional services firms and the wider economy built around them."

Can the numbers actually add up?

Even among those broadly sympathetic to Burnham's aims, there is scepticism about how the agenda gets paid for.

Simon Heath is blunt about the mathematics. "There is inherently no way of financing greater infrastructure investment or utility nationalisation programmes from the current tax-take," he says. "That means either increased taxation or greater government borrowing to finance these initiatives given the lack of appetite to address bloated department budgets."

He argues the combination of high business taxation and cost of living pressure on households leaves little room for further tax rises, which "implies the magic money tree will be in full bloom, and government will have to borrow beyond the historic record levels."

Arjun Kumar takes a different view of where the money might come from, pointing to enforcement rather than new taxation. Citing recent research from Tax Policy Associates, he notes that between £30 billion and £48 billion is estimated to be missing from small business tax bills every year, with small businesses now accounting for close to two-thirds of the UK's entire tax gap. "The question is whether Burnham has the political discipline to pursue the unglamorous, technical work of HMRC enforcement reform, rather than reaching for the easier headline of a new tax," he says. "The autumn Budget will be the first real test of whether the maths adds up."

Others argue the immediate market reaction will hinge less on the detail of any single policy than on fiscal discipline being maintained in practice. Erik Magnusson, director of corporate strategy and delivery at Lumon Pay, frames it as a question of credibility rather than ideology. "The key point from Andy Burnham isn't the politics, it's the discipline," he says. "If that commitment starts to look shaky, where pledges and policies start to widen the deficit, or is otherwise unfunded, sterling takes the hit. It's that simple."

Assuming that discipline holds, Magnusson expects attention to remain on the Bank of England and inflation rather than on Burnham himself, particularly as easing oil prices reduce some of the inflationary pressure the new government might otherwise have faced.

That reading is broadly shared by analysts at Jefferies, who have expressed doubt that Burnham's agenda can be funded without further borrowing. "Our worry remains that there is no extra money to increase public spending," the investment firm noted. "Tax rises are likely to be ineffective and efficiency savings never work." With UK government debt approaching £3 trillion and annual debt interest already running at around £100 billion, the margin for error is limited.

The political backdrop

The reaction from Westminster has, unsurprisingly, split along party lines.

Tory leader Kemi Badenoch has called on Burnham to face parliamentary scrutiny before his agenda is taken at face value, saying he "needs to come to Parliament, tell us what he wants to do and face some questions from MPs, the people elected to hold the Government to account."

London mayor Sir Sadiq Khan has struck a more cautious note from within Labour's own ranks, warning against any redistribution of investment that comes at the capital's expense.

The Confederation of British Industry has offered a conditional welcome. Chief executive Rain Newton-Smith says businesses could support Burnham if he applies nationally the approach that shaped his time in Manchester. "Businesses could get behind Mr Burnham if he followed the positive, dynamic and collaborative approach that has helped public and private sectors drive growth in Manchester at a national level," she says, though she cautions that "proposals for greater intervention in markets such as transport and utilities must avoid deterring investment."

The City of London Corporation has struck a broadly similar tone, with policy chairman Chris Hayward welcoming Burnham's recognition of London's role in driving national prosperity, while stressing that the detail of any devolution plans will be decisive.

A credible answer to Reform?

Underlying much of this commentary is the question posed in our introduction: whether Burnham's agenda offers a genuine economic counterweight to the appeal of Nigel Farage and Reform UK, which – despite its leader’s recent controversies and by-election stunt – continue to lead the polls and are tipped to form the next government.

Here again, the City's judgement is qualified rather than settled. Alessandro Hatami believes the approach has real potential, provided it is followed through. "Giving communities greater control over housing, transport, skills and investment addresses some of the material frustrations on which populism thrives," he says. "However, financial decision-makers and business leaders will judge it on delivery, tax stability and whether government works constructively with private capital. Without visible improvements in living standards and public services, the political argument will not be enough."

The Heligan Group’s Simon Heath is more sceptical that Burnham himself is equipped to make that argument. "Burnham has no national economic track record and no clear economic policy, so we can only assume that given his left-leaning political views, that the focus will be on government spending to catalyse economic growth," he says. "The challenge is how this is to be financed as the tax burden is at all-time highs and the UK has less borrowing capacity. The risk is that it will be unbudgeted and frivolous spending which will be viewed negatively by under-pressure business leaders."

The contest for this territory is not entirely one-sided, however.

Industrial decline and the loss of domestic manufacturing capacity have themselves become a recurring theme in Reform's own messaging, with Farage among the first party leaders to call for the nationalisation of the steel industry. Burnham's own pledge to safeguard sovereign manufacturing in sectors such as steel, defence and food production sits on similar ground, and represents an area where he may be attempting to draw support directly from voters otherwise drawn to Farage's critique of economic decline.

That contest is complicated by tensions within Reform itself, where more free-market figures such as the Conservative defector Robert Jenrick have pushed the party toward a less interventionist position, leaving an opening that Burnham's agenda appears designed to exploit.

Whether that translates into support from financial decision makers specifically is a separate question from whether it appeals to the electorate more broadly.

Much of the scepticism expressed by the City's own voices centres not on whether Burnham's diagnosis of the problem is correct, but on whether a government built around devolved spending and greater state intervention can be relied upon to maintain the fiscal and regulatory stability that investment decisions depend on.

That tension, between an agenda designed to answer a political threat and one that reassures markets, may prove to be the defining question of Burnham's early premiership.

What the City is really waiting for

What emerges from the City's reaction so far is less a verdict than a set of conditions. Almost none of the commentary gathered for this piece rejects Burnham's stated aims outright, whether that is rebalancing the economy away from London and the South East, rebuilding the housing stock, or offering a credible answer to Reform's rise.

The scepticism, where it exists, centres overwhelmingly on delivery: whether the fiscal rules hold, whether devolution adds genuine capacity rather than simply redistributing what already exists, and whether a government that has yet to appoint a chancellor can turn an ambitious speech into a functioning programme.

As Simon Heath puts it, with some detachment, financial markets have outlasted governments before and are likely to do so again. "Politicians and Prime Ministers are fleeting, temporary and domestic against the backdrop of a longstanding global finance sector with hundreds of years of history," he says. "The FS sector will shrug its metamorphic shoulders to a new prime minister and continue as it always has."

Whether that proves true of Andy Burnham, or whether his premiership marks a genuine turning point for the City's relationship with government, is likely to become clearer once a detailed plan, and the identity of his chancellor, is known.

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