UK General Election: Part 3 – The Final Result

After six weeks of campaigning, the Labour Party are now officially in office. Following their landslide victory in the General Election last week, Dominic Tayler, Managing Director at Oakglen Wealth UK, offers some insight into what the new administration could mean for the UK and the wider economy.

The unveiling of a manifesto is a significant moment in any campaign, and Labour’s manifesto for change has been set out as a plan to kickstart economic growth.

But what does this look like exactly?

In the lead up to the General Election on 4th July, Sir Keir Starmer was keen to impress that no tax hikes were planned, with commitments not to raise income tax rates, national insurance, or VAT. However, like any new administration, Labour will look to give something to their voters, so expect to see some more demand-friendly fiscal policies.

Labour has pledged to pursue several policies in an effort to boost medium-term growth. We would expect to see reforms to the planning system given the Party’s manifesto pledge to build 1.5 million new homes over the next five years. Such a move would be supportive for housebuilders and other construction focused companies. Keir Starmer recently announced that work has already begun to strike a new deal with the EU. We would therefore expect to see moves to have closer trade and securities ties with the EU to mitigate some of the economic costs of Brexit, albeit any near-term gains are likely to be limited by Labour’s three “red lines” for its EU policy, including no return to the single market, the customs union or return to freedom of movement.

Recent media reports have suggested that a Labour government could increase capital gains tax (CGT) and inheritance tax despite their previous claims. Clearly such a move would have significant ramifications. In terms of how a CGT hike could impact UK equities, recent analysis by Goldman Sachs highlighted that 60% of UK equities are held by non-UK investors who are taxed by their own fiscal authorities. Furthermore, Goldman’s estimated that CGT liability pertaining to UK-listed shares sold by UK investors each year is around £1bn or 0.1% of market cap.

The new Chancellor of the Exchequer, Rachel Reeves, had been on a charm offensive with the City of London in the lead up to the General Election. Indeed, in its manifesto, the Labour Party outlined plans to increase investment from pension funds in the UK markets, in a bid to use this area to boost growth. Hopefully, we will see some further incentives here, alongside the UK ISA proposed by the Conservative government in its Spring budget.

As we have previously highlighted, the UK faces persistent challenges – anaemic growth, burdened by high taxes and a significant budget deficit equivalent to 4.4% of GDP, according to the latest government figures. While we see selective opportunities in sectors like healthcare, oil and mining, we see greater investment opportunities elsewhere. Watch this space for further updates.

Hear more from the Oakglen experts

Our investment team continue to provide topical and informative content for you to gain insights from. Leading the way is our Chief Investment Officer, Jeff Brummette, who has put together a concise investment summary for H1 2024, whilst our UK Managing Director, Dominic Tayler, has provided a series of updates on the UK General Election up to this point in time.

Read more:

You can read other articles from the team on our News & Insights page.

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Dominic Tayler

Managing Director - UK

+44 (0) 20 4583 1149

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