After a resounding by-election win for Andy Burnham as an MP last Thursday and increasingly loud calls for the prime minister to step down, Keir Starmer has resigned and set out timetable for succession, with nominations for the leadership opening on 9 July if the Labour party decides to go down a contest for a new PM.

Starmer plans to step down as soon as a new Labour party leader is chosen, possibly as soon as mid July if there is no contest, but otherwise by September.

Less than two years after a landslide, Starmer has resigned, the sixth prime ministerial resignation in less than 10 years.

Members of Starmer’s team gathered in Downing Street as the prime minister announced resignation and plans for handover. His resignation will undoubtedly trigger a change of chancellor too once a new PM comes in.

Starmer said he acknowledged the calls for his resignation from Labour party MPs, asking ‘whether I am best placed to lead this country into the next election’.

 He said he had heard ‘this answer’ and would stand down ‘with good grace’.

‘That is why I will resign as leader of the Labour party… I will ask the national executive of the party to set out a timetable with nominations opening on 9 July and completed by the summer recess [17 July].’

The PM will remain in post until the contest is complete and said he would ‘ensure I do everything I can to ensure a full and orderly handover of power… I will give my successor every support’.

In his speech, Starmer said: ‘Six years ago I inherited a Labour party that was politically and morally bankrupt, time and time again I was told my party was finished. I was told a majority at an election was impossible, let alone a landslide.’

In reality, Labour under Starmer won a massive landslide, with a more than 400 MPs, and although the win was only with 34% share of the vote under first past the post. This was an overwhelming victory after the virtual wipeout of Labour under Jeremy Corbyn in the 2019 general election. But it has not been an easy premiership with a lack of strong communication about achievements and numerous u-turns destabilising confidence among MPs.

Now potential candidates need to secure the support of over 80 MPs in the Labour party, although it is equally possible that newly elected Andy Burnham could be made PM without a formal contest. Former health secretary Wes Streeting also resigned a month ago, saying he would run for PM, but he has now declared his support Burnham for leader.

For the public, it would seem vital to have some kind of leadership contest to learn what Andy Burnham stands for and how he would govern the country. The change of PM will also raise questions about the future of the chancellor Rachel Reeves and Burnham’s tax and economic policy direction.

There is now deep uncertainty about the future direction for the country with an immediate hit to the pound after the announcement although this subsequently settled, while the stock market remained steady. With scant detail on Burnham’s policy agenda if he were to become prime minister, which is the nailed on likelihood, professional Joe Nellis, economic adviser at MHA, said: ‘Investors are now focusing on what an Andy Burnham premiership will look like.

‘The volatility in the market reflects that perhaps not even Mr Burnham knows what this looks like. Initially offering himself as a more fiscally expansionary alternative to Prime Minister Starmer, in recent weeks he has dialled back some of his suggestions for increased public spending and committed to maintaining the current fiscal rules.

‘Who he chooses to form his economic team, particularly his choice as chancellor, will also be crucial. This makes it difficult to predict the policy direction of his government.’

Businesses and investors will be focused on policies related to taxation, government borrowing, public spending, and regulation, and ‘less on the personality of the next PM’, suggested Nellis, but this seems unlikely as one of Starmer’s weaknesses was not engaging and connecting with the public, a critical factor for any successful leader.

With the economy hardly growing and an increasing tax burden on businesses, all eyes will be on the new government.

‘What firms really need is a government that will back them to deliver growth, rather than making trading more difficult by heaping up ever more regulatory and taxation costs,’ said Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC).

‘That means making sure that government works with business to achieve its aims, rather than imposing solutions that sound good to Westminster think tanks and more radical union leaders, but do not help ordinary workers and companies who are trying to drive the country forward.’