Issue eight | This is the era of multi-party politics - business must adapt 

Last week’s English local elections marked not a moment of protest but a structural reconfiguration of British politics. The implications for corporate strategy, investment and government relations are significant.

 

The English local elections, combined with results from Scotland and Wales, delivered something more consequential than a mid-term rebuke to a struggling government. The two-party system is collapsing, and the consequences are less predictable.

 

The headline numbers are striking. Reform UK gained over 1,400 councillors across England, displacing Labour in swathes of its northern industrial heartlands winning bastions like Wigan, Barnsley, Sunderland while simultaneously sweeping Conservative-held shires in Essex and Suffolk. Reform’s 27 per cent national vote share, were it replicated at a general election, would translate to approximately 280 Commons seats – the largest single bloc, but not a governing majority.

 

The Green Party’s performance deserves equal attention. Gains across London boroughs long considered Labour’s bedrock in recent years – including mayoralties in Lewisham and Hackney – along with significant advances in cities like Manchester and Sheffield, reflect an urban coalition of younger voters, students and Muslim communities. Several strategists formerly associated with Jeremy Corbyn’s insurgent operation are now directing Green campaigns, bringing with them proven expertise in populist digital mobilisation. The Greens are not a protest movement. They are becoming a structural force in urban politics.

 

In Scotland, the SNP won 58 seats topping the poll for the fifth consecutive time. But the overall SNP vote fell to its lowest level since 2007 so while they continue in government at Holyrood, it’s difficult to see how they can frame the vote as a mandate for a second independence referendum. On saying that the Sinn Fein First Minister in Northern Ireland Michelle O’Neill wasted no time in pointing out we could well be heading for pro-independence First Ministers across Scotland, Northern Ireland and Wales. Westminster is yet to wake up to the potential consequences of what this might mean for the future integrity of the United Kingdom.

 

In Wales, the results were catastrophic for Labour. Labour, which has governed since devolution and held political dominance in Wales for over a century, has been pushed into third place. Plaid Cymru appears set to lead a minority administration, with Reform as the official opposition.

 

Will Keir Starmer Survive?

The results have sent shockwaves through the Labour Party with more and more MPs alongside trade union leaders calling on the Prime Minister to set out a timetable for departure. Influential and popular former cabinet minister Louise Haigh was one of the first to call for Starmer to go while on Sunday previously uber loyal ex minster Josh Simons, who was gifted a seat by Starmer’s fixers, wrote damningly in The Times that Starmer ‘has lost the nation.’

 

The most striking and blistering intervention came from Angela Rayner late Sunday afternoon. Criticising Starmer for blocking Andy Burnham from running for the Commons, Rayner was excoriating on the No. 10 “toxic culture” and called for Andy Burnham to return.

 

“It’s time to acknowledge that blocking Andy Burnham was a mistake. We must show we understand the scale of change…that means bringing our best players into Parliament” she posted. On Saturday, a frustrated former minster sacked by Starmer in a previous reshuffle and London MP, Catherine West announced she would challenge Starmer for the leadership – not because she wants to be leader herself but to trigger a contest.

 

Labour’s rules are arcane and procedural. To begin a contest a Labour MP needs the nominations of 80 colleagues. If West secures 80 nominations a contest is on and other contenders can throw their hat into the ring. Some Westminster insiders speculate that West won’t get the nominations. Andy Burnham backers don’t want a contest now and need to delay until the self-styled ‘king of the north’ finds a route back into Westminster. Some have suggested however that supporters of Wes Streeting may lend nominations to West to get a contest up and running. At that point expect Streeting, possibly Rayner given Burnham isn’t back in the Commons and maybe Home Secretary Shabana Mahmood and Foreign Secretary Yvette Cooper to enter.

 

Starmer has always indicated he would fight back if challenged. That fightback began over the weekend with the appointment of Gordon Brown and Harriet Harman to envoy roles – both carry huge respect and affection with the grassroots. It’s no surprise Starmer chose two Labour member facing newspapers – The Sunday Mirror and Observer – to indicate his intention to face down any challenge. His post drubbing message was for the Labour movement not the country. That in itself reveals how anxious No. 10 is about a leadership challenge.

 

On Monday, the Prime Minister will deliver a reset speech where he is expected to signal support for greater alignment with the EU. While he won’t deviate from his so called ‘red lines’ – there will be no return to the single market or custom union – No. 10 is convinced closer co-operation with the EU is vital for our economic resilience and national security. It’s a make-or-break speech with Labour MPs waiting to see what he says before deciding whether to nominate Catherine West and trigger a contest.

 

But whatever happens in the coming days, few Labour MPs and ministers expect Starmer to fight the next election as Labour leader. Indeed on Sunday night there was fevered speculation that the Prime Minister might set out a timetable for departure as soon as this week. The odds have been slashed on whether there will be a new Labour Prime Minister before the next general election and business should prepare for what that could mean.

 

The constraints that bind every government

What matters most for business leaders is not which party or combination of parties ultimately governs, but the fiscal and structural parameters within which any government must operate.

 

The UK’s public finances are at or near the limits of what bond markets will tolerate in terms of borrowing. Years of anaemic growth have starved public services and infrastructure of the investment required for meaningful reform. International instability across trade, security and energy demands expenditure commitments that sit in direct tension with the fiscal position the UK finds itself in. Any government, of whatever complexion, will govern in these constraints.

 

Against that backdrop, the policy directions signalled by the emerging political forces are revealing. The Green surge is already generating renewed pressure – from trade unions and a growing number of Labour backbenchers – for wealth taxes and the renationalisation of utilities such as water. Meanwhile, Reform’s electoral coalition creates expectations around immigration, public spending and economic nationalism that are difficult to satisfy within the small state Thatcherite instincts of leading Reform politicians.

 

The era of multi-party politics, long the norm across Continental Europe, has arrived in Britain. Businesses must now assess the practical implications of that in terms of regulatory and policy risk, with a far wider range of scenarios to now consider.

 

Former Labour MP for Leicester South, Jonathan was a long-standing senior member of Keir Starmer’s shadow cabinet and played a central role in the Party’s 2024 general election campaign. 

 

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