Now the revolving door of 10 Downing Street has stopped spinning, and Andy Burnham has emerged as the UK’s 7th Prime Minister in the last 10 years, the new PM arrives on the back of a widespread realisation within Labour that the party needed to change.

Previous Prime Minister Keir Starmer had become deeply unpopular on both the right and the left, and had become entrenched in unflattering media narratives. So what awaits Burnham and what will his ascent to power mean for businesses in the UK and in Europe?

The King of the North

What Burnham undoubtedly represents is a more relatable figure than Starmer. Where Starmer was a lawyer, and someone considered part of the establishment despite not being a career politician, Burnham is considered more connected to the average person. He comes from Manchester in the north of England, something of a rarity in itself in English politics, and arrives from a successful stint as mayor of Greater Manchester. His policy successes and popularity have been enough to see him nicknamed ‘the King of the North’. 

The perception is that Burnham was legitimately connected to his constituency, and cared about issues affecting average people. His efforts in the first couple of days as PM reflect this. Burnham quickly moved to address the cost of living crisis directly, both eliminating VAT on energy bills and capping bus prices. This is likely to be part of a package of reforms aimed at making tangible improvements for working and middle class voters, ensuring that they see tangible changes in the three years before the next general election.

All of this aims to counter the threat posed by right-wing populist party Reform UK, and their leader Nigel Farage. Having spearheaded Brexit, Farage has continued to rail against the establishment, pinning the UK’s economic issues on the cost of housing refugees and immigrants, and on the push for net zero carbon emissions. Reform lead most current polling in the UK, and are currently expected to win the next general election. This is all in spite of ongoing investigations into both Farage and his deputy Richard Tice, and Farage’s subsequent decision to resign and initiate a by-election, where he is won against an intergalactic dustbin (yes, really).

How will Burnham affect UK businesses?

What all of this means for businesses is presently unclear. In some areas, it may prove to be a continuation of current and beneficial policies. While much has been made of Ed Miliband’s move from Energy Secretary to Foreign Secretary, investment in renewable energy projects and the current high rate of approvals are both likely to continue. Despite Reform campaigning against the UK’s net zero obligations, renewable investment has been a boon for the UK economy, and is expected to lower energy costs in the long-term, with gas prices being the main contributor to high energy bills. Any move to placate Reform supporters on this issue would run directly contrary to Burnham’s stated aim of saving people money.

How this Labour government costs its new policies is an open question. The price cap on bus fares and removal of VAT from energy bills are both said to be covered by existing budgets, as well as the nixing of an expensive plan to introduce a digital ID system. But Burnham’s new Defence Secretary John Healey previously resigned from Starmer’s government due to cuts in the defence budget. With defence spending now likely to rise further, Burnham’s government will need to find new billions somewhere.

One option is simply to raise spending. As the Guardian points out, Healey is not considered to be a ‘fiscal hawk’, and is likely to err on the side of increasing the deficit to achieve Labour’s policy goals. That could be good news for businesses, who already feel that margins are extremely tight, and there is no room for manoeuvre on issues like business rates and VAT.

Another option has been to restore the ‘50p income tax’ rate on the highest earners, meaning a 50% rate for salaries over £150,000. This has not been ruled out as of the time of writing, but is a contentious issue that was skirted by Starmer’s government for fear of alienating wealthier voters. It may however be necessary if Burnham wants to achieve another aim: to unfreeze the personal allowance for income tax, allowing the rate to rise to increase the untaxed portion of wages, and save more money for lower earners.

There are more latent benefits for businesses, however. Many industries have struggled because of a lack of consumer spending power, despite the Bank of England holding the current interest rate at 3.75%. More money in people’s pockets—particularly thanks to quick changes such as bus fares and VAT rates—could be a boon for businesses in sectors such as retail and hospitality, where both cheaper travel and more money in pockets could provide a boost in footfall.

The impact on businesses in Europe

For businesses based in the EU, or those weighing up whether the UK remains an attractive market for expansion, Burnham's arrival in Downing Street raises as many questions as it answers. In spite of this, the early signals are encouraging. Unlike Starmer, Burnham has not built his political identity around Europe, and his public statements to date have been careful not to reopen the Brexit question directly.

He has, however, been open about a personal, long-term ambition to see the UK rejoin the EU within his lifetime. That represents a marked change in tone from a Labour leadership that had, until now, treated the subject as politically radioactive. However, Burnham's government remains bound by the same ‘red lines’ that constrained Starmer: no return to the customs union, the single market, or free movement of people.

For business groups pushing for closer alignment, including calls for a form of ‘associate membership’ that would reduce trade friction without full re-entry, that means the prospect of a rapid breakthrough is unlikely.  What is more likely is a continuation of the incremental, sector-by-sector cooperation seen in areas like defence and security, where a non-binding UK-EU Security and Defence Partnership was already in place before Burnham took office.

The appointment that will matter most for European businesses is likely that of his new Foreign Secretary, Ed Miliband. Miliband's move from the energy brief has been welcomed across the continent, where he is a familiar and well-regarded figure from his years representing the UK in international climate negotiations. That existing relationship could smooth the path for closer UK-EU cooperation on energy policy, climate targets, and industrial strategy, all areas where European businesses with cross-border supply chains and energy-intensive operations stand to benefit from reduced regulatory friction, and closer alignment of standards.

There is also a wider signal here about the UK's foreign policy focus. Miliband's recent energy agreement with California Governor Gavin Newsom points to a government keen to build alliances beyond Washington, at a moment when the transatlantic relationship has grown more unpredictable. For EU-based companies, a UK government less singularly focused on the US relationship (and thus more open to parallel partnerships in Europe and beyond) could mean a more receptive climate for cross-border deals, joint ventures, and inward investment from the continent.

None of this amounts to a reversal of Brexit, nor should European businesses expect the fundamentals of UK market access to change quickly. But the direction of travel points to a UK that may be gradually easier to do business with over the course of the next few years. For European companies considering establishing a presence in the UK, or UK businesses looking to strengthen their footing on the continent, this could present an opportunity, at least until the next general election brings a different set of priorities into Downing Street.

As always with early-stage governments, the gap between ambitious rhetoric and actual policy can be wide, and Burnham's coalition will face many of the same issues that Starmer’s did. But businesses operating across UK-EU borders would be wise to treat the current moment as one of cautious opportunity. While we’re still in the honeymoon period, it’s worth keeping a close eye on how Burnham's stated aims translate into new policies and the potential positive results for businesses across Europe.