England Labour Party: The recent UK elections saw the Labour Party win a landslide victory, winning 405 out of the 650 seats available. This result is undeniably a historic moment for Labour, which wins after 14 years and thus comes close to Tony Blair’s extraordinary performance in 1997, when he won 419 seats. On the other hand, the Conservative Party suffered a devastating defeat, winning only 154 seats.  Analysts say Labour’s victory could positively affect the British stock exchange while favouring sectors such as banking and construction. Finally, not insignificantly, Labour’s victory could bring the country closer to forging greater ties with the European Union. 

Why are Labour in government now: a victory announced? 

Keir Starmer inherits an electorate eager for change in a context of economic crisis and distrust of institutions. Labour’s victory, with Rishi Sunak ready to pack his bags from Downing Street, fits into a European political framework where many countries move to the right, making the British result even more significant. The UK has also experienced years of turbulence under the leadership of the Conservatives.

Brexit, the COVID-19 pandemic and the invasion of Ukraine have hit the economy hard. Scandals such as the lockdown parties organized by former Prime Minister Boris Johnson have further eroded voters’ confidence. Rising poverty and cuts in state services have prompted many Britons to seek political alternatives. Starmer’s Labour Party has taken a more centrist line, moving away from the radical positions of former leader Jeremy Corbyn. This approach has attracted the support of large swathes of the business community and traditionally conservative newspapers such as the Sun. Starmer has restored hope to a tired electorate and brought the party back to positions of greater political pragmatism. 

Economic impacts 

From an economic and financial perspective, a Labour victory could positively affect the London Stock Exchange. Henry Dixon, portfolio manager at Man Group, points out that substantial parliamentary majorities have historically coincided with above-average economic growth. A stable, centrist majority could allow UK equities to catch up with their European counterparts while improving IPOs and mergers. The banking and construction sectors could benefit most from a Labour victory. The party manifesto identifies construction as a key economic engine. Dixon says that construction companies’ valuations and earnings potential are promising, while banks should not suffer significant negative impacts. On the contrary, high tax rates could penalise the energy and transport sectors. 

Analysts predict that, after the election, the focus will shift rapidly to monetary policy and lower interest rates. Nomura’s poll indicates that the elections will not affect the Bank of England’s decisions. 

Relations with the EU 

Labour could seek to strengthen relations with the European Union, a prospect that could favour the pound and keep the volatility of the euro/sterling exchange rate low. Starmer ruled out a return to the EU but said he was in favour of strengthening trade and security ties. He also added there would be no return to the single market or customs union despite the original campaign to remain in the EU. Starmer criticized Boris Johnson’s post-Brexit deal, calling it inadequate. Shadow Chancellor Rachel Reeves explained that Labour will seek a less confrontational approach in negotiations with Brussels, focusing on specific agreements. The Labour Manifesto provides for a reduction in border controls to lower the cost of food and facilitate touring artists, as well as mutual recognition of professional qualifications. 

Agreements that could be beneficial to the British economy could meet with internal political resistance, especially with regard to the oversight of the European Court of Justice, a sensitive point for Eurosceptic voters. 

The commitment to the defence of Ukraine 

The Labour Party has expressed a strong commitment to NATO and the defence of Ukraine, which is in line with the Conservatives. Patrick Bury, a former NATO analyst, believes Labour’s approach to the military alliance will be one of continuity. Labour intends to keep its commitment to spend 2.5% of GDP on defence despite the economic challenges of high inflation. In their program, Labour has highlighted the importance of rebuilding security and defence relations with countries such as Germany and France.