Investors in City have stated that a landslide win for Keir Starmer at the general elections on Thursday would give Britain a premium of stability in global markets. This could boost the pound, share prices and investment in Britain during a period of political turmoil in other countries.
Analysts in London’s City of London, in stark contrast to Conservative Party warnings about the dangers of an Labor majority of large size, said that a resounding victory for Starmer’s Labour party could ensure Britain’s status as a “safe haven” among investors in a volatile world.
Rishi Sunak, after failing to close the gap during the election campaign made a final-ditch warning about a Starmer’supermajority’that would “bankrupt the people in every generation”.
Analysts in the City said that a Labour victory could open the door to global investment after the Tories’ 2016 Brexit referendum, which created years of uncertainty for investors.
The City experts highlighted the mounting political instability in both the United States and Canada, as well as the financial market meltdown triggered by Liz Truss’s mini-budget. Investors spoke of an ” Moron Premium” when it came to Britain.
Nuwan Goonetilleke is the head of shareholder investments at Phoenix Group. The company manages over £280bn of assets. He said that money had already poured into London-listed stocks in anticipation of Labour’s victory.
He said that the UK was not only seen as a safe place, but also as one of the safest places in Europe.
“Given previous gyrations in the markets — whether it’s Liz Truss’s policies or Jeremy Corbyn Labour’s leftwing policies in 2019 — we’re really not seeing any of these wild swings anymore. This shows how far the UK is from Brexit, when the UK was priced in with huge unknowns.
“With a Labour majorit, it continues to double down on this promise of economic growth, stability and wealth creation.”
Since Emmanuel Macron announced snap elections in France early in June, the pound has surged against the euro in global currency markets. This development opens the door for a possible victory by the far-right or a hung parliament in France’s largest economy.
Joshua Mahony is the chief market analyst for Scope Markets. He said that given the political shockwaves felt in Europe, a stable political climate could help position the UK economy as an economic haven for many years to come.
The UK government bond yields are stable, but French borrowing costs have increased sharply in recent weeks. Investors said that uncertainty about the outcome of the US presidential election, which took place in November, also helped to boost UK assets.
After Sunak failed to close the 20 point gap in opinion surveys that showed the Conservatives heading for their worst defeat since 1906, any other result would be a shock.
Starmer also moved Labour to the centre of the economy while courting large business. This drew criticism from the left, who claimed that his agenda would be similar to that of the Tories. He was also accused by the left of giving influence to wealthy interest groups. Some party insiders, however, believe that abandoning Corbyn’s policies is crucial for wooing the swing voters. It also helps to combat accusations of fiscal incompetence which have been lingering on the party ever since the 2008 financial crash.
The Labour leader, and his chancellor Rachel Reeves argue that restoring stability to the Tory party after years of infighting, leading to the party’s fourth Prime Minister since 2016, could reinvigorate the private investment in Britain. This would help him achieve his growth goals without needing to raise taxes or borrow more money.
Opinion Polls show that many voters do not give Sunak much credit for the economic “turning around” under his leadership.
Michael Browne said that the British economy and financial markets would benefit from a period stability under a Labour Government with a “more moderate and global in tone”.
He compared the current situation to 1997, when sterling and UK government bonds rallied ahead of Tony Blair’s overwhelming victory. To quote a popular campaign slogan from 1997, “Things can only improve.” With the current background we would like think so for UK equity assets.
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