^{Photo: BBC}

British Prime Minister Keir Starmer will take the stage at the Labour Party conference in Liverpool, a speech that carries unusually high stakes for a leader just over a year into office and backed by a commanding parliamentary majority. Rarely has a British prime minister faced so much pressure this early in their premiership.

The challenge for Starmer lies in juggling multiple audiences: a restless Labour base demanding more left-leaning policies, a skeptical business community angered by surprise tax hikes, and financial markets wary of fiscal slippage after the turmoil that followed Liz Truss’s brief tenure.

A divided party and rising rivals

Within Labour, grassroots members are pushing for bolder measures such as scrapping the two-child cap on child benefits and taking a tougher line on Israel over Gaza. Starmer’s cautious centrism is being tested not only by internal critics but also by emerging rivals outside the party. The Greens are gaining traction, and former Labour leader Jeremy Corbyn is preparing to launch his new political project, “Your Party.”

On the right, Nigel Farage’s Reform Party is polling strongly, peeling away disillusioned voters from both Labour and the Conservatives. This fragmentation of support raises the stakes for Starmer’s ability to hold the political center.

Business confidence under strain

Perhaps the most immediate pressure comes from the business sector. Having courted companies before the 2024 general election, Starmer’s government has since unsettled them with sharp tax increases. Chancellor Rachel Reeves shocked corporate leaders by imposing a £25 billion payroll tax rise in her first Autumn Budget, contributing to higher unemployment, fewer job vacancies, and falling hiring intentions.

The Confederation of British Industry (CBI) reports that the tax burden on firms has climbed to 30.5%—the highest in decades. Further policies, including the end of zero-hours contracts, expanded worker rights from day one, and scrapping “non-dom” tax status, have deepened frustration.

Major sectors have responded with retrenchment. Pharmaceutical giants like Merck and AstraZeneca have scaled back investment in Britain, citing concerns over drug pricing rules. Oil and gas companies are cutting jobs after the windfall levy was extended, while wealthy investors and entrepreneurs have begun relocating overseas to avoid higher inheritance and capital gains taxes. The result is visible in weaker public finances and declining private sector confidence.

Business needs reassurance

For Starmer, today’s speech is an opportunity to rebuild trust. Business leaders want clarity that there will be no more surprise tax raids, while banks are especially wary of talk about cutting the interest paid on deposits held at the Bank of England. The energy sector is hoping Labour softens its ban on new North Sea exploration, perhaps by allowing additional drilling on existing sites—a move that could boost investment.

Pension and investment firms are looking for reassurance too. They want confirmation that tax incentives for retirement savings will remain intact, especially the popular tax-free lump sum allowance. Longer term, many are calling for reforms to make the U.K. more competitive globally.

In a recent letter to the Financial Times, NatWest Group chair Rick Haythornthwaite urged the government to simplify the tax system, unlock domestic capital, and boost housing supply while supporting the transition to net zero. His message reflected what many in corporate Britain hope to hear from Starmer: a long-term plan for stability and growth.

Markets on edge

Financial markets will also be paying close attention. The U.K. is already paying a premium to borrow from bond markets, and credibility with investors remains fragile. The scars of Liz Truss’s failed “mini-budget” in 2022—when markets punished unfunded tax cuts with surging gilt yields and a collapsing pound—are still fresh.

Starmer’s ally, Chancellor Reeves, warned this week that fiscal discipline is non-negotiable. In her speech to the conference, she reminded delegates that any loss of confidence would quickly raise borrowing costs and inflation, hurting ordinary households. Her remarks were met with a muted response compared to spending pledges, but they signaled Labour’s awareness of the risks.

The stakes for Starmer

If Starmer delivers a credible, balanced message today, he could calm bond markets, reassure business leaders, and strengthen his standing with voters concerned about economic competence. A misstep, however, could embolden rivals, deepen divisions within his party, and trigger renewed uncertainty in markets already on edge.

As NatWest’s Haythornthwaite put it, “A bold long-term plan can kick-start growth, reassure debt markets, and deliver much-needed social benefits.” Business leaders, markets, and party members alike will be hoping that Britain’s Prime Minister can rise to that challenge in Liverpool.