On 5 July 2024, it was announced that the Labour Party had won a majority in the General Election. Labour’s first prime minister in 14 years, Sir Keir Starmer, will now look to bring a period of change to the UK government and economy.
Now a few weeks on, and with the dust having settled, George Square discusses how the financial markets have responded to this news.
An expected win
Even before the exit polls, it was widely predicted that Labour would win the election. Because the outcome was expected, we haven’t seen any dramatic shifts in the financial markets, and investors have welcomed the news that brings with it an end to political uncertainty in the UK. Typically, we only experience more extreme levels of market volatility when investors are caught by surprise.
Financial stability
The calm in Britain’s financial markets following Labour’s victory contrasts with turmoil elsewhere in Europe. The election outcome appears to have brought more stability and less risk than may have been the case had Labour been elected several years ago. As we enter into a period of financial stability, which we likely see a renewed investor interest in the UK.
With a clear majority and commitment to fiscal rules, economic and policy uncertainties are anticipated to be low in the immediate months after the results. This comes in direct contrast to France’s post-election landscape, which now faces heightened uncertainty and volatile markets following the country’s fragmented election outcome.
The UK market has been steadily rising and is set to retake its crown as Europe’s most valuable for the first time in almost two years. With the stability brought on by the election results there is potential for renewed investor interest in the UK.
Impact on the pound
So far, the election results have had a limited impact on the pound. It is now back to where it was in 2016, at the time of the Brexit vote, which is a notable milestone and perhaps reflects a belief among traders that market turmoil might be coming to an end.
While it is always difficult to predict the future of the pound, it is possible that it will strengthen under the Labour Party if policies designed to grow the UK economy go ahead as planned. An early, key political event that will have a big influence is Labour’s first Autumn statement, which will give the Party an opportunity to fully set out its plans for the UK economy.
If you are unsure as to how the results of the 2024 General Election might affect you and your finances, please get in touch today and we would be happy to support you.