British Prime Minister Keir Starmer issued a rallying cry to his staff on Monday, signalling he would not heed calls to step down after a second aide resigned over the decision to appoint Peter Mandelson as ambassador to the United States.

Downing Street Communications chief, Tim Allan, said he was resigning to make way for a new team to support the British leader, a day after Starmer's closest aide, Morgan McSweeney, stepped down over Mandelson's ties to the late US sex offender Jeffrey Epstein.

With the Epstein revelations raising questions over Starmer's judgment and ability to govern, the British prime minister addressed staff at his Downing Street office on Monday to again express his regret over the Mandelson appointment.

"We must prove that politics can be a force for good," he told them, praising McSweeney as "a friend" who helped change the Labour party and win the 2024 national election with one of the largest parliamentary majorities in modern British history.

"I believe it can. I believe it is. We go forward from here. We go with confidence as we continue changing the country."

His spokesperson later told reporters Starmer was focused on getting on with the job and had no plans to step aside, adding Allan's resignation happened after the staff meeting.

But the pressure showed no sign of abating, with the Times newspaper reporting that Anas Sarwar, leader of the Scottish Labour Party, would call for Starmer to quit when he holds a press conference later on Monday.

Labour in Scotland has seen its support slump since the 2024 election, with some polls putting it in third position behind the Scottish National Party and the populist Reform UK.

Starmer struggles to change narrative

The second resignation and reports on Sarwar's position did little to quieten those voices in Labour and opposition parties calling on Starmer to step down.

British government borrowing costs rose, reflecting investors' concerns that a more left-wing Labour leader, who was willing to borrow and spend more, could take over.

"It's painful," said one Labour lawmaker on condition of anonymity. "It's like watching a fatal car crash in slow motion."

After deciding with McSweeney on Sunday that it was the right moment for the government aide to move on, Starmer had hoped to reset the narrative and attempt to return to an agenda he has so far failed to keep any focus on - tackling the cost of living crisis and boosting the British economy.

The leader of the opposition Conservative Party, Kemi Badenoch, accused Starmer of being unable to run his government.

"He's like a plastic bag blowing in the wind. We need him to get a grip and if he can't do it then someone else in the Labour Party needs to do that, or they should have an election," Badenoch told Sky News.

Starmer had hoped Allan, appointed in September to shore up a struggling Downing Street operation, would help the government secure a better hearing in the British media, but the former adviser to ex-prime minister Tony Blair often drew criticism for being slow to take decisions.

"I have decided to stand down to allow a new No.10 (Downing Street) team to be built. I wish the PM and his team every success," Allan said in a statement.

Prime minister to meet lawmakers

The new scandal over Mandelson, who was sacked as ambassador to the United States in September, came after files released by the US Justice Department last month included emails suggesting Mandelson had leaked discussions on possible UK asset sales and tax changes to Epstein during the financial crash.

Mandelson has not commented publicly on allegations he leaked documents, and did not respond to messages seeking comment.

Starmer will meet Labour lawmakers later on Monday and try to ease anger over the handling of Mandelson's appointment and quieten those voices saying he should quit.

Mandelson is now under police investigation for alleged misconduct in office.

Starmer has defended his own actions, accusing Mandelson of creating a "litany of deceit" about his Epstein ties and promising to release documents on how he was appointed.

"The thing that makes me most angry is the undermining of the belief that politics can be a force for good and can change lives," he told his staff.

"I have been absolutely clear that I regret the decision that I made to appoint Peter Mandelson. And I've apologised to the victims, which is the right thing to do."