Keir Starmer promised “stability and moderation” in his first speech as prime minister outside 10 Downing Street, after Labour won a landslide victory that ended 14 years of Conservative government.
This had been expected and “priced into” financial markets, so the market reaction was muted today. The pound rose by 0.4% against the dollar to $1.2809, and by 0.3% against the euro to €1.1826.
The FTSE 100 index rose by 0.4% in the morning and later gave up its gains to close 37.33 points, or 0.45% lower, at 8,203.93. The domestically-focused FTSE 250 ended the day 0.86% higher at 20,786.65, a gain of 176.31 points.
Housebuilders rallied on the London stock market, as investors bet that Starmer’s pledge to bulldoze planning rules and build 1.5m new homes would benefit the sector.
Vistry Group rose 3.4%, Taylor Wimpey added 2.8% and Barratt gained 2.4% while Persimmon and Berkeley Group both closed 2.2% higher.
The Invest in Women Taskforce has welcomed the appointment of Rachel Reeves as the first female chancellor, which she co-chairs. Fellow co-chair Debbie Wosskow said:
A female chancellor, one of the highest offices in the country, who has already vowed to put women at the heart of economic plans, is so vital. A female chancellor who also recognises the billions that female entrepreneurs could add to Britain’s economy is even better.
Reeves has already vowed to close the gender pay gap once and for all, and to make flexible working the norm. These are structural drivers of inequality that should be addressed at a policy level and will play an integral part in allowing women to embrace entrepreneurship.
For the most effective change, though, we need to enable a new era of public and private sector collaboration. Just 2% of capital investment goes into all-female founded teams in the UK, and we need to break this decades-long cycle. This is exactly what the taskforce exists to do and, by working with the new chancellor, we will make great strides this year and put the UK on the map for female entrepreneurs.
Former Nissan and Aston Martin executive Andy Palmer has said that the Labour party could signal a new phase for the UK automotive industry.
Palmer was chief operating officer at Japanese carmaker Nissan, bringing mass manufacturing of electric cars to the UK for the first time. He then led British sportscar maker Aston Martin until 2020. He said he hoped a stable government could attract more inward investment from major companies to build in the UK.
He said:
I’m no politician, but I am an auto guy, an industry guy. What I saw over the last five years was a disengagement with industry and business.
I woke up today with probably a greater sense of optimism for an awful long time, at least in that I’m pretty sure the Labour party will listen to autos and business.
Palmer said he believed that the UK needs more battery manufacturing. He is now chair of a Slovakian battery company, Inobat, which could potentially benefit from government support if it were to invest in the UK.
We’ve fallen behind dramatically in that green revolution. We need to grasp it.
Reeves has a tough task on her hands. Andrew Hunter, a senior economist for Moody’s Analytics, said the Labour may soon have to choose between higher taxes, higher borrowing or spending cuts.
The new Labour government has an historically strong electoral mandate, but will still need to tread a fine line between enacting the required spending and reforms to improve public services and revitalise the economy, and maintaining the confidence of financial markets.
Moreover, these challenges come at a time when the economy already faces a variety of other risks, including from geopolitical tensions or the possibility that persistent inflation could warrant interest rates staying high for longer than currently assumed.
Attracting sufficient levels of private-sector capital through their green investment plans will likely to be key to Labour’s hopes for a sustained resurgence in economic growth. But, while there is an upside risk that this succeeds and helps drive a sustained improvement in the economy’s supply side performance over the coming years, it is not our current baseline forecast.
Keir Starmer and Rachel Reeves, due to be appointed chancellor shortly, have been running a charm offensive with the City of London’s financial sector. Will it work?
Alasdair Haynes, chief executive of Aquis Exchange, an alternative stock exchange focused on smaller companies, said:
The first thing they’ve got to do is gain the confidence of the City. The first 100 days is really going to matter.
Reeves has “done a good job so far” of reassuring the City with her pitch of stability, said Haynes. However, he said he wanted the government to offer more help to growing companies, and incentives to keep them in the UK rather than going elsewhere. He would particularly like the extension of the enterprise investment scheme, a tax break for investors, to companies that are growing quickly (including many that are listed on his exchange).
However, Haynes is sceptical about plans to raise taxes that would hit some of the City’s wealthiest, such as abolishing a loophole that allows private equity bosses to pay capital gains tax on earnings rather than higher income tax, abolishing the tax break for non-domiciled people, and taxing private schools.
“It doesn’t help when you read things in the Guardian about putting up capital gains tax,” said Haynes. “That kills entrepreneurship. That’s just total madness.”
City workers in Paternoster Square, where the headquarters of the London Stock Exchange Group is based, in the City of London, UK. Photograph: Bloomberg/Getty Images
There are clear similarities between running a business and running an economy. When revenues stagnate, cost cutting takes over. For years now it feels like we’ve been trying to shrink to greatness and it’s time to change course. We urgently need to invest. In our public services, in infrastructure, in our schools and universities and in housing. Our new government must foster productivity, encouraging regulators to facilitate real competition and holding businesses to account for their failures. It must encourage banks to support SMEs and drive out complacency about falling service standards. Real competition leads to better customer outcomes.
When it comes to employee welfare, companies should be encouraged to follow the data and not the dogma. Happy and healthy colleagues are good for business. And our path to net zero can either be a burden or an opportunity. We should make it the latter and incentivise companies to invest in renewables and in a sustainable future. A new government and prime minister offers us a rare opportunity to re-boot UK plc. We must seize it with both hands.
Bruce Carnegie-Brown, chairman of insurance marketplace Lloyd’s, said:
Lloyd’s looks forward to partnering with the new UK Government to generate growth and to build resilience into our economy. Our role is to provide critical solutions to support disaster resilience, insuring the transition and bringing global investment to the UK. We look to the government to bring a period of greater stability and to enact reforms necessary to improve the economy’s competitiveness.
Atom Bank CEO, Mark Mullen Photograph: undefined/Atom Bank
Bosses in the financial sector have called on the new Labour government to boost investment and increase productivity after the sweeping win under Prime Minister Keir Starmer, write Kalyeena Makortoff and Jasper Jolly.
The financial industry is one of the UK’s key sectors, accounting for about one in every 12 pounds generated by the British economy.
Labour described financial services in its manifesto as “one of Britain’s greatest success stories”, and has pledged to bring forward public-private partnerships to fund investments in infrastructure.
Here is what some of the City’s bosses had to say.
Andrea Rossi, chief executive of investment manager M&G, said:
With over 12 million people in the UK seeking assistance to achieve financial security and the UK’s financial advice gap widening (only 9% of Brits currently have access to advice), we would want to see any new government implementing policies that encourage long term savings and support better retirement outcomes.
There is currently an acute set of societal challenges and barriers to saving for many, with the cost-of-living crisis drastically reducing disposable incomes. We’d look to work with the next government and the wider financial services industry to provide more opportunity for savers to benefit from financial products that meet their investment needs.
As a member of Labour’s British Infrastructure Council I look forward to working with the government to unlock private investment to boost infrastructure investment in the UK. Private-public investment initiatives will be key in getting capital to sustainable British real estate and infrastructure projects that can position the UK for sustainable growth.
Paul Ashworth, chief North America economist, said despite June’s forecast-beating 206,000 gain in non-farm payrolls, overall this was a “disappointing” report given the total 111,000 downward revisions to past months and the further rise in the unemployment rate to 4.1%, “which puts us one step closer to triggering the Sahm rule on recessions”.
That 206,000 gain was also not nearly as good as it looks at first glance, with 70,000 coming from government jobs.
Of the 136,00 increase in private payrolls, health care and social assistance accounted for 82,000 of those additional jobs. That suggests cyclical employment increased by only around 50,000, adding to the evidence of weakness in GDP growth, he said.
Admittedly, the rise in the unemployment rate to 4.1%, from 4.0%, was for the “right” reasons, with a 277,000 increase in the labour force eclipsing a muted 116,000 increase in the household survey measure of employment.
That means we’re getting closer to triggering the so-called Sahm rule, although since the rate is being driven up mainly by strong labour supply rather than weak labour demand, we would caution against relying on it too heavily in what has been a unique cycle in many respects.
The 206,000 increase in employment in June was similar to the average monthly gain of 220,000 over the past year, the bureau said.
Government employment rose by 70,000 in June, higher than the average monthly gain of 49,000 over the past 12 months. Healthcare added 49,000 jobs, lower than the average monthly gain of 64,000 over the prior 12 months. Employment in social assistance increased by 34,000 in June, primarily in individual and family services (+26,000). Construction added 27,000 jobs in June, higher than the average monthly gain of 20,000 over the past year.
Michael McDonough, chief economist of financial products at Bloomberg, said on X:
Job gains occurred in government, health care, social assistance, and construction, the US Bureau of Labor Statistics said.
The number of long-term unemployed – those out of work for 27 weeks or more – rose by 166,000 to 1.5 million in June, up from 1.1 million a year earlier. The long-term unemployed accounted for 22.2% of all jobless people in June.
Average hourly earnings increased by 0.3% month on month, leaving the annual growth rate unchanged at 3.9%.
