Alastair Power, Investment Research Manager
“The election result was well signposted in the lead up to voters heading to the polls, with the main question being around the size of the majority. Financial markets had ample time to price in the potential result and thus it is unsurprising to see limited movement of UK financial markets the morning after.
“Labour has a challenging time ahead with cost-of-living pressures and social concerns within areas such as housing to tackle in the coming years. Having badged themselves as the party of wealth creation, their toughest task may be reigniting economic growth. Execution risk here remains high with the main challenges being the current level of interest rates and working within the outlined fiscal rules.
“Despite the hurdles laying ahead, it’s encouraging to see the party’s focus on economic growth. Success in this area has the potential to generate increased levels of interest in the UK economy and financial markets after an extended period of being out of favour in the global context.”
What are the key priorities for the new government?
Tackling economic growth and promoting the UK as an attractive business destination will remain a key challenge. Growth remains subdued and the base rate has remained at 5.25% since August 2023.
Growth-focused, business friendly, policies that encourage global businesses to come to the UK, while also incentivising domestic businesses to increase investment spending, are key to driving long-term economic growth and should be a priority for any governing party.
A reminder of the Labour Manifesto
1: Straightforwardly titled “Change,” Labour’s manifesto positioned it as the party of wealth creation.
2: A raft of policies aimed at improving productivity and business investment have been revealed – the party sees this as a key route to increasing living standards.
3: The party’s ‘tax and spend’ label was downplayed and plans were relatively modest. Labour aims to raise £8bn in revenue by removing the non-domiciled scheme, levying VAT on private schools and further windfall taxes on energy companies.
4: Pledge to maintain the pensions triple lock.
5: VAT on private school fees generated media attention, a move estimated to raise up to £1.6bn per year.
6: A target to build 1.5 million homes. Labour has also included measures to address planning rules and the price of land, which the party believes has hindered development.
Please note that this communication is for information only and does not constitute a recommendation to buy or sell the investments mentioned. Investments and income arising from them can fall as well as rise in value. The information and views were correct at time of publication but may have changed at point of reading.