Global insights - UK General Election 2024

Key takeaways

1. Setting the Scene: Market Reactions and Economic Context:

• Market Sentiment: The announcement of the general election led to a relatively calm response in equity and bond markets. Sterling continued its rise against a basket of currencies, suggesting international investors remained calm.
• Poll Influence: The strong poll lead for Labour, projecting a significant majority, has been stable for several weeks, leading markets to factor in this potential outcome. However, possible changes, such as a Conservative and Reform Party alliance, could significantly alter the projected outcomes.
• Bank of England’s Decisions: Upcoming decisions by the Bank of England, such as the potential deferral of a rate cut, may also impact market reactions.
• Investment Needs: There is a significant need for capital to fund major investment plans, emphasising the importance of maintaining investor confidence.

2. Investment and Economic Policies:

• Labour’s Green Prosperity Plan: Labour’s policies focus on significant investments in renewable energy, including ambitious targets for wind, solar, and hydrogen capacities by 2030, and the establishment of Great British Energy.
• Conservative Continuity: If the Conservative Party were to be successful, their policy is likely to continue existing priorities, such as maintaining current energy and infrastructure initiatives, including nuclear projects and improvements in water management.
• Infrastructure Development: Labour proposes creating a National Infrastructure and Service Transformation Authority to streamline project delivery, while the Conservative Party has been focusing on the Edinburgh reforms to enhance the UK’s financial market competitiveness and fostering sustainable finance.
• Funding Strategies: Labour aims to fund its ambitious investment programs through a combination of public and private investments, with an emphasis on international capital, while ensuring no increases in taxes or borrowing.

3. Technology and Digital Transformation:

• Technology Integration: Labour’s plans to date integrate technology into their broader missions, including economic growth, clean energy and NHS modernisation, with specific investments to enhance existing tools like the NHS app.
• Regulatory Innovation Office: Proposal to establish an office to ensure regulators support innovation, aiming to boost sectors like digital technologies and life sciences.

4. Employment Policies and Labour Relations:

• Plan to Make Work Pay: Labour commits to strengthening workers' rights but with a commitment to being pro business. They also commit to following proper Parliamentary procedure and consultation before implementation of new rights.
• Legislative Initiatives: Possible quick wins include ethnicity and disability gap pay reporting, addressing fire and rehire practices, and expanding the remit of the Low Pay Commission.

5. Taxation and Fiscal Strategy:

• Fiscal Policies: based on announcements to date, Labour plans no overall increase in national debt, focusing on fair taxation, including potential changes to non-domiciled individual taxation and carried interest rules alongside other already announced changes.
• Compliance and Enforcement: Significant investment in HMRC is planned to enhance compliance and enforcement, aiming to increase revenue without raising headline tax rates.

6. Financial Services and EU Relations:

• Sector Support: Both Labour and Conservative policies highlight the importance of the financial services sector for the UK economy, with plans to maintain competitiveness post-Brexit.
• EU Trade Relations: Labour proposes efforts to improve trade relations with the EU, though regulatory divergence will likely continue in the short to medium term. The Edinburgh reforms are aligned with Labour’s proposals to enhance the UK’s financial market competitiveness and foster sustainable finance.