Effects of Labour Party Policies on UK Investments

Jul 2, 2024

Effects of Labour Party Policies on UK Investments

Overview of Content

  • Optimism in UK stock market
  • Potential change of government
  • Effects of Labour Party policies on equity and bond markets
  • Sectoral benefits and tax challenges

Labour Manifesto Fiscal Plan

  • New Sources of Revenue
    • Closing tax loopholes: £5 billion
  • New Expenditures
    • NHS: More operations, scans, doubling MRI and CT scanners
  • Total
    • New revenue: £7.4 billion
    • Expenditure: £4.8 billion
    • Fiscal Headroom: £2.6 billion
  • Comparison context:
    • Total UK government income (2023): £1.1 trillion
    • New revenue: 7% increase
    • Expenditure: 4% increase
  • Goal: Not rocking the boat, maintaining lead
  • Comparison with US Inflation Reduction Act:
    • US new spending: $433 billion (10% of tax receipts)
    • UK spending package much smaller

UK Stock Market and Labour Party

  • Historical antipathy between stock market and Labour
  • Labour poised to win, market pushing all-time highs
  • Labour policies: Business-friendly, focus on growth, infrastructure, and education
  • UK growth challenges: Financial crisis, pandemic, Brexit
    • GDP and productivity stalling since 2008 crisis

Positive Impacts on Specific Sectors

  • Housing Industry
    • Plan: Build 1.5 million homes over 5 years
    • Current completions: 150,000/year
    • Potential growth beneficiaries: House builders, suppliers (bricks, glass)
  • Clean Energy
    • Great British Energy: Focus on coastal (tidal, wind), solar power
    • Funding: Windfall tax on oil and gas giants
    • Impact on energy sector and indices (FTSE 100 and 250)
  • Infrastructure
    • Ports: £1.8 billion
    • Gigafactories and EV batteries: £1.2 billion
    • Steel industry: £22 billion
    • Carbon capture: £1 billion
    • Green hydrogen: £500 million
  • Pensions
    • Proposal: Mandate investment into UK infrastructure

Labour Market Policies

  • Minimum wage linked to inflation
  • Impact on company margins and competitiveness

Oil, Gas, and Rail Industry Policies

  • No new oil, gas, or coal licenses; ban on fracking
  • Windfall tax continuation on oil and gas
  • Renationalization of railways under Great British Railways

Challenges and Risks for Bond Market

  • Strict fiscal rules: No big deficit, limited new debt issuance
  • Concerns: Over-ambitious spending, economic instability, potential downgrading of UK debt

Tax Policies for Investors

  • No increase in income tax, NI, VAT, or corporation tax
  • No return of lifetime allowance cap
  • Abolishment of non-dom status
  • Realignment of offshore trusts and private equity loopholes

Conclusion

  • Labour Manifesto promising but financially constrained
  • Potential UK economic revitalization if policies succeed
  • Encouragement for increased investment and equity market growth

Resources