Local elections and Labour leadership

As the dust settles on a momentous set of elections last Thursday, voters have given their starkest indication yet of the multi-party, broken-party state of British politics. They may have also glimpsed what post‑general election 2029 political realignment in the UK could begin to look like.

Institutional breakthrough with Reform UK winning control of 14 English councils, minority nationalist governments in Wales and Scotland, and a populist surge for the Greens especially in London all point to an historic rupture now not just for the Conservatives, but Labour too. And for embattled Prime Minister Keir Starmer, a leadership contest very likely to trigger within months or even days.

Elected Labour leader in 2020, Keir Starmer’s main job was to replace his hard left predecessor; he was never loved by the party faithful and was only elected to parliament in 2015. His great gamble of 2024’s general election was to say little in the way of real domestic policy reform, avoid getting drawn into debates on the economy or public services, and simply let the Conservatives implode. It paid off: he was rewarded with a once in a generation majority.

But in power, compounded by a catalogue of needless scandals, Starmer’s original lack of clarity has consistently haunted Labour. In terms of how specific public policy delivery can improve the lives of ordinary voters, the Prime Minister has failed to connect. With his own MPs, hundreds elected for the first time in 2024, there has similarly been no settled will established for the political direction of the party. Keir has failed to make the case for what Labour is for.

And for Labour voters in England, there now exist viable alternatives on the left and right, arguably for the first time ever. In Scotland and Wales, nationalism doesn’t appear to mean separatism (yet), and Labour’s historic unionist credentials can afford to be overlooked. The progressive centre-left alignment between Labour and the Liberal Democrats is long gone, and even the sharp rise in independent candidates – over 200 elected last week – comes more from policy issues more impacting the left than the right.

Starmer has signalled his intention to learn from both the election results and Labour’s first two years in office, and to continue leading the party. However, persistent fracturing of the core Labour vote – coupled with his own record unpopularity – means a formal challenge to Starmer’s premiership is almost inevitable. The question for Labour, is whether they can coalesce around a candidate – or a ticket – that can unite the party, or whether a fractious, divisive leadership election risks entrenching divisions further ahead of the next election.

In terms of who might run:

• Angela Rayner, former Deputy Prime Minister, is the standard bearer of the left, but doubts remain whether she wants the job and if revelations about underpaid tax have persistently damaged her credibility.
• Similarly, Health Secretary Wes Streeting will have to cast aside lingering suspicions about his previous association with disgraced peer, Peter Mandelson.
• Andy Burnham – Mayor of Greater Manchester – can only mount a challenge if Labour’s ruling NEC lets him re-enter parliament, and if he can win a seat in a by-election.
• Outriders like Defence Secretary John Healey might hope to appeal to a broader coalition of Labour interests, as a safe pair of hands.
• There is likely to be a candidate who will run on a continuity ticket, i.e. that Labour’s vision and mandate is secure but needs to be communicated better; Darren Jones appears to be the obvious choice.
• Unlike in a Tory leadership race, the Prime Minister himself can of course stand – and unless he stands down, is on the ballot paper automatically.

A contest is triggered if the Labour leader resigns, or if 20% of Labour MPs (81) nominate a challenger. But unlike the Conservatives, there is no formal vote of confidence mechanism for Labour. So, either pressure must be brought on a leader to resign, and potentially rule themselves out of the subsequent race, or a candidate must be prepared to challenge the incumbent – either for themselves, or to secure a contest for an ally.

The eventual vote for Labour leader – unless a “dream ticket” is unopposed – can take several months, as members and affiliated unions cast their votes, along with MPs. Realistically, a contest triggered now could install a new Prime Minister potentially by July but would rule out a return for Burnham. If a timetable can be agreed to hold off a contest until the summer, then a new Labour leader could be in place by party conference, with theoretically time for Burnham to win a seat.

The question then for the heirs to Keir – and for the Prime Minister himself – is whether a leadership campaign won is all the better for Labour itself in taking on and defeating Burnham. Or whether Burnham’s popularity with voters would make him (like Johnson was for the Tories) irresistible to Labour members and trades unions. Labour’s core dilemma is that the best candidate to lead the party might not command the strongest support from the wider British public, and vice versa.

In the absence of decisive action, Starmer remains in post, albeit in a significantly weakened position ahead of tomorrow’s King’s Speech. Reform and the Greens’ challenge after these set of elections is translating insurgence to administration, governing councils facing acute financial pressures. The Conservatives must ask whether fragmentation on the right is now structural rather than cyclical. And nationalist minority governments in Cardiff and Holyrood must stitch together working majorities or risk political stalemate.

What does this mean for business?

1. The importance of scenario planning: Westminster is once again a highly volatile operating environment. Whilst Labour retains a strong parliamentary majority, its reduced political authority is likely to constrain policy ambition and reinforce a focus on short-term, deliverable outcomes. A leadership contest will drain bandwidth from political actors and force the civil service into “safety first” mode.
2. The need to re-map where power sits: Local and devolved governance is more fragmented, with many councils under No Overall Control and new or unfamiliar party leadership. Fragmented governance will lead to slower decision-making, shifting alliances and more volatile policy outcomes. Policy, regulation, and political priorities will increasingly differ between Westminster, Holyrood and Cardiff Bay.
3. Assume broadened engagement strategies: The multi-party environment means Labour and the Conservatives are no longer sufficient touchpoints. Reform, the Greens and smaller parties now hold meaningful influence, creating new veto points. Engagement should assume compromise and uncertainty rather than single-party clarity. Messaging should emphasise local impact, economic contribution, and tangible outcomes to resonate with a broader range of political actors.