UK Prime Minister Keir Starmer set to outline exit plan as pressure to quit builds

U.K. Prime Minister Keir Starmer is expected to set out a timetable for his departure on Monday, reports suggest, kickstarting a process that will see the country appoint its seventh leader in a decade.

Andy Burnham, Labour's former Greater Manchester Mayor, is favorite to replace Starmer after winning a special election in north-west England last week that will see him return to parliament.

Following that result, Starmer had initially vowed to fight any leadership challenge. However, speculation that Starmer may now quit mounted over the weekend.

A number of senior U.K. government ministers have reportedly urged the prime minister to spell out an exit plan, including Foreign Secretary Yvette Cooper, Home Secretary Shabana Mahmood and Energy Minister Ed Miliband.

A heavy defeat in last month's local elections, coupled with sustained poor opinion polling, has steadily eroded the prime minister's authority over the ruling Labour Party.

Starmer's resignation would clear the way for Burnham — due to be sworn in as a member of parliament later Monday — to succeed him as Labour leader and U.K. prime minister.

Burnham's sizable victory in last week's Makerfield by-election has further bolstered his standing within the party, making a leadership contest unlikely and leaving him poised to enter Downing Street unopposed.

U.S. President Donald Trump said in a TruthSocial post on Sunday that Starmer will resign.

"He failed badly on two very important subjects- IMMIGRATION AND ENERGY (OPEN NORTH SEA OIL!)," Trump said in the post.

The pound was last seen 0.23% lower against the dollar, trading at $1.3202. The yield on 10-year U.K. government bonds, known as Gilts, was flat early Monday at 4.8452%.

Lizzy Galbraith, senior political economist at Aberdeen, said that while Burnham currently benefits from being outside Westminster, representing "something that is different" in the eyes of voters, he will still inherit the same challenging fiscal constraints that have hampered the Starmer government's agenda.

U.K. gilt yields jumped on Friday following Burnham's by-election win. However, he has been keen to placate markets lately, distancing himself from previous statements in which he suggested the U.K. was "in hock to the bond markets."

"In the short term, Burnham is actually going to be more focused on gaining the confidence of markets, and not moving too radically away from the current political agenda, certainly on fiscal policy, that has been set out under Keir Starmer and [Chancellor] Rachel Reeves," Galbraith told CNBC's "Squawk Box Europe" Monday.

Chris Beauchamp, chief market analyst at IG, warned that markets look dimly upon a free-spending approach from Burnham, given the U.K.'s "dire" financial state.

"For markets, the question is what will really change. Does Burnham, who already has form on flip-flopping, have the strength of will to chart a more dynamic course than the drift exhibited by Starmer's period in office?," Beauchamp said.