City of London fears who will replace Rachel Reeves as UK Chancellor

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LONDON — Rachel Reeves’ tears in the House of Commons once sent financial markets spiraling. Now they’re the ones sobbing.

Britain top finance minister is likely days away from leaving office. It comes as Andy Burnham — set to become U.K. prime minister on Monday — considers his own pick for the Treasury.

That’s left financiers spooked about the potential for a new chancellor to crack down on the sector.

Sipping English sparkling wine at Reeves’ final speech in the heart of the City of London on Tuesday evening, bankers, tech bros and other financial figures bemoaned that they’d never had it so good.

One senior financial services figure — granted anonymity like others in this article to give their frank opinions as they quaffed bubbles — described “nervous anticipation of what’s next” and “an air of trepidation” as Reeves gave her speech last night.

Banking chiefs fear there’s no possible chancellor replacement that could be as friendly to the City as their predecessor. “I think the City doesn’t know how good they’ve got it. Reeves has been the best chancellor for the City in two decades,” another figure said.

Reeves’ record

Since Reeves became chancellor following the July 2024 election, she has overseen deregulation of the financial system in almost every sector, with bank capital requirements, insurance rules, and stock exchange regulations all slashed in an attempt to get the City growing again.

Lenders, the London Stock Exchange and investment providers jumped for joy when she pushed for Brits to put their money in stocks and shares — and personally intervened to limit the amount that individuals can save in cash tax-free, in an attempt to promote a greater investment culture among retail savers.

Reeves was viewed as the furthest to the right of her party on economic issues, resulting in markets tanking when she visibly cried in parliament behind her boss, the now-departing Prime Minster Keir Starmer. With the legacy of short-serving Conservative PM Liz Truss fresh in the mind of traders, Reeves’ commitment to stick to fiscal rules and bring down borrowing was seen as key in keeping volatile government bond markets steady.

But her relative popularity around the City contrasted with her image among voters, as the most unpopular politician in the country according to YouGov. And she made plenty of enemies in the business community too, with hikes to national insurance contributions for employers and an increase in capital gains tax. The inability of the government to push policies past her left-wing backbenchers, including cuts to welfare, also led to a souring perception of her ability to exert fiscal discipline.

However, even in areas that irritated the financial sector, such as the debate over the tax break for hedge fund and private equity executives, known as carried interest, Reeves moderated her positions to meet the industry in the middle.

It was fitting, then, that her final major speech took place in Mansion House at the City of London on Tuesday, where she was greeted by a raucous round of applause from financial figures, standing with a beaming smile to argue how her record on financial services and the economy had been a roaring success.

“I am proud that the decisions that I have made as chancellor provide a stable platform for the next prime minister to take our country forward,” Reeves told a room containing dozens of banking and insurance CEOs, top lobbying officials, and international figures including the European Commission’s top financial services civil servant and the ambassador of Switzerland.

Things can only get worse

Energy Secretary Ed Miliband has long been seen as a leading candidate to replace Reeves, and the City is gloomily accepting that this is a serious possibility. Multiple figures told POLITICO during Tuesday’s Mansion House dinner they were “almost certain” he would take the top job next week, although other names are very much in the fame, including Home Secretary Shabana Mahmood and Foreign Secretary Yvette Cooper.

Miliband, a former Labour leader, has scared the City with previous support for raising taxes on banks and a sense that he will be far more interventionist in the economy.

But even if Mahmood or Cooper manage to clinch the role, neither can enjoy Reeves’ “smoked salmon offensive” reputation, gained as a result of her holding dozens of breakfasts in the run-up to the election with business figures and pushing to rebuild Labour’s standing beyond its base.

“Rachel Reeves in the lead-up to the general election spent quite a lot of time speaking to people in the City. And now we’re going to end up with a situation where you’ve got someone completely out of that, that hasn’t been involved in it,” lamented Tom Bacon, a partner at law firm BCLP.

Despite consensus that Reeves will not stay in the job under Burnham, that hasn’t stopped her trying. A large portion of her Tuesday speech was focused on Burnham’s project of regional prosperity, something that had rarely been a focus of the chancellor until now.

“Since the election we have taken a new approach, increasing investment in regions across Britain and taking steps to unwind the old model which hoarded too much power in London,” she said.

One finance boss in attendance described the speech as “a job application,” while another said it was her “attempt to stay relevant.”

In the financial services world, there is at least one sector rooting for Miliband. The sustainable investment sector hopes that the former Labour leader would pump billions into solar panels and wind farms.

But the green industry, like the rest of the City, might just end up disappointed.