Among the companies with reports and trading updates today are Shell and Time Out Group. As Labour scores a landslide election result, the pound rose slightly, gaining 0.2 per cent against the dollar to reach $1.277.
Will Starmer be cautious or ambitious with his economic plans?
Neil Wilson, chief markets analyst at Finalto, comments on the markets’ modest reaction to a Labour victory:
We are seeing very muted reactions in FX markets as a Labour win was; a) well priced and b) not scary for the markets – at least not yet. The question is now – just how bold does PM Starmer go?
Is it a case of ‘steady as she goes’ in terms of economic policy so as not to frighten the horses, and face pressure later from within its own ranks to borrow lots more; or go big and bold early on in the first 100 days? Fair to say we get the usual kitchen sink job from an incoming chancellor by blaming it all on the last guy.
Markets may like less of an overhang of political uncertainty. They may like some pro-growth measures. The reality of higher taxes has not bitten yet. In terms of the pound, I think a lot depends on the fiscal credibility of the government, which remains untested.
Has the Overton Window shifted in favour of greater borrowing? I’d say ‘yes’ but the market may not agree…A lot of also depends on France and the US elections this year.
It will also depend on respective monetary policy moves and the BoE may well be about to embark on a faster and deeper rate cutting cycle than either the Fed or the ECB. This could see sterling come under pressure.
Housebuilding firms likely to benefit, analyst says
Richard Hunter, head of markets at Interactive Investor discusses the impact of the election result on markets and the housebuilding sector:
In the UK, the expected Labour landslide was effectively much ado about nothing in terms of market movement.
The main index opened marginally higher, with sterling steady after recent gains which have lifted it to pre-Brexit levels on a trade-weighted basis, with investors speculating that the element of political uncertainty which has now been removed could lead to a period of some stability, albeit without significant growth in the shorter term.
One sector which most agree will see some benefit from the new political regime is housebuilding, which has seen some recent strength on hopes of reforms, less red tape in terms of planning and more supply. In early trade, the likes of Persimmon, Vistry Group, Taylor Wimpey and Barratt Developments all rallied on improved prospects which are also being driven by the possibility of an interest rate cut later in the year.
The FTSE 100 is now ahead by 7 per cent so far this year, while the more domestically focused FTSE 250 has added 5 per cent, having swung from a negative position in previous months.
The FTSE 100 index opened at 8241.26
The pound at 8am was 1.2770 dollars compared to 1.2761 dollars at the previous close.
Labour take charge amid improving economy
Thomas Pugh, economist at leading audit, tax and consulting firm RSM UK, comments on the UK’s economic direction following the election of a new government:
The new Labour government doesn’t change our view that the economy will continue to improve over the rest of this year and into 2025, or that the Bank of England will cut interest rates twice this year.
The economic recovery we are forecasting is driven by low inflation, a significant increase in households real disposable incomes and rising consumer and business confidence all translating into stronger spending, investing and GDP growth. Nothing we have heard from Labour so far should alter that.
However, the new government has its work cut out in three key areas. First, it will have to work out how to tackle the tough fiscal picture it has inherited. Sticking with the current plans suggests imposing additional austerity on some government departments.
But raising enough tax to avoid cutting spending will be difficult, given taxes are already scheduled to rise. Borrowing more may ease the problem, but headroom is limited.
We want to hear your views…
Let us know in the comments how you think a Labourgovernment will shape the economy, businesses and invetsment. What should they do or avoid? What needs to be prioritised?
What will Labour do for small businesses?
Emma Jones CBE, founder and CEO of Enterprise Nation, comments on what a Lbaour general election victory might mean for small businesses:
We are particularly encouraged by Labour’s recognition of the crucial role entrepreneurs, start-ups and small businesses will play in realising their vision for a more prosperous Britain. Supporting small enterprises means more innovation, more quality jobs, and local economic revitalisation.
Labour’s manifesto included several pledges that resonate with our members’ priorities, as outlined in our small business manifesto. The commitment to reform the outdated business rates system is a welcome step towards a fairer model for all businesses.
We are also pleased to see Labour’s plans to tackle late payments, improve access to public contracts for SMEs, and boost exports through targeted advice and a clear trade strategy. These initiatives have the potential to significantly support small business growth and success.
The promise to guarantee access to banking services on the high street through accelerated banking hubs is another positive move that could contribute to broader high street regeneration efforts.
As Labour prepares to take office, we look forward to working closely with the new government to help bring their mission for economic growth to life. We stand ready to offer our expertise and represent the voices of entrepreneurs and small businesses as these important policies are developed and implemented.
‘A landslide victory provides the sort of clarity and stability that equity markets need’
Ben Ritchie, head of developed market equities at Abrdn, comments on the election victory by Labour:
A landslide victory provides the sort of clarity and stability that equity markets need in an increasingly volatile world.
Labour’s pro-growth agenda is key to delivering the tax revenues needed to fund public services, with private capital playing a vital role in supporting investment.
If the new Government get this right, businesses with significant exposure to the UK economy should be the likely winners – a shot in the arm in particular for companies in the FTSE 250 and FTSE Small Cap. With just a little more patience, investors could finally be rewarded.
A key priority for the new Government should be to make UK equities more attractive for both domestic and international investors.
One of the quickest and most effective way to deliver this is to scrap stamp duty on UK shares, making Britain more competitive, rewarding savers and attracting vitally needed inward investment.
