Keir Starmer’s landslide victory in Thursday’s general election could give Britain a stability premium in global markets, boosting the pound, stocks and UK investment at a time of growing political unrest elsewhere, City investors said.
In stark contrast to the Conservative Party’s warnings of the dangers of a large Labor majority, analysts at the City of London said the prospect of a resounding mandate for Starmer’s party could secure Britain’s “safe haven” status among investors in an increasingly volatile world.
After failing to close the gap in the polls during the election campaign, Rishi Sunak issued a final warning that Starmer’s “overwhelming majority” will “bankrupt people in every generation”.
But City analysts said a Labor landslide could pave the way for global investment in Britain after years of political and economic uncertainty since the Tory-led Brexit referendum in 2016 clouded the outlook for international investors.
Underscoring growing political instability on both sides of the Atlantic and the meltdown in financial markets triggered by Liz Truss’s mini-budget – with investors talking of a “stupid premium” for Britain – City experts said a clear result on Thursday could return Britain to stability. basis.
Nuwan Goonetilleke, head of shareholder assets at Phoenix Group, which manages more than £280 billion in investments, said money was already flowing into London-listed assets in anticipation of a Labor victory.
“The UK is really seen not just as a safe haven, but as the safest haven – especially in Europe,” he said.
“With the swings in the markets before, whether it’s Liz Truss or Jeremy Corbyn’s left-wing politics in 2019, we’re not really seeing any of those wild swings now. This tells you how far the UK has come from Brexit when there were huge unknown prices for the UK.
“With a Labor majority, he continues to really double down on that promise of economic stability, growth and wealth creation.”
The pound has strengthened against the euro in global currency markets since Emmanuel Macron called snap elections in France in early June, a development that opens the door to a possible far-right victory or a hung parliament in one of the EU’s most powerful economies.
Joshua Mahony, chief market analyst at Scope Markets, said: “Given the political turmoil being felt in Europe, the prospect of a stable political environment could still help position the UK economy as a haven for years to come.
While UK government bond yields have remained flat in recent weeks, French borrowing costs have risen sharply. Investors said uncertainty over the outcome of the US presidential election in November also boosted British assets.
Any result other than a clear victory for Labor would have come as a shock to City trading rooms after Sunak failed to overcome a 20-point gap in opinion polls that show the Tories on course for the party’s worst defeat since at least 1906.
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Starmer has also moved Labor to the economic center while courting big business, prompting criticism from the left that his agenda for government would differ little from that of the Tories and favor wealthy interests. But some party insiders believe shedding Corbyn-era politics is important to woo voters and deal with allegations of fiscal incompetence that have dogged the party since the 2008 financial crisis.
The Labor leader and his chancellor, Rachel Reeves, also say restoring political stability after years of Tory infighting – leading the party to its fourth prime minister since 2016 – could revive private investment in Britain and help meet its growth ambitions without the need for a big increase taxes or additional government loans.
While Sunak has claimed that “difficult decisions” taken during his prime ministership have helped the economy “turn the corner”, which could allow the Bank of England to cut interest rates, polls suggest many voters refuse to give him much credit after 14 years. Tory government.
Michael Browne, chief investment officer at asset manager Martin Currie, said the UK economy and financial markets could benefit from a period of stability under a Labor government that was “more moderate and international”.
He said the situation was comparable to 1997, when British government bonds and the pound rallied in anticipation of Tony Blair’s landslide victory. “To quote a famous 1997 campaign slogan: ‘Things can only get better.’ Given the current situation, we would like to consider this in terms of UK property assets.’