Sir John Royden, Head of Research, analyses whether and when Labour might win the next election, and the effect this could have on UK industries.

Which party is likely to win in the next UK election?

At the time of writing, Labour are ahead of the Conservatives in many opinion polls such as POLITICO, where as of July 14th 2023, 46% of respondents said they intended to vote Labour in the next UK election, far surpassing the 26% who would vote for the Conservatives. Only 10% intend to vote for the Liberal Democrats, the third highest – indicating that the election is set to be a two horse race.

Despite their strong lead in the polls, Labour’s chances of obtaining an overall majority are far more close cut than it might ostensibly appear: they require a win in 124 constituencies to achieve this - based on poll results, they are currently on course to win between 123-125 extra seats. An alternative outcome if Labour do not reach a majority is a hung parliament.

Could there be an early election in the UK?

The next UK election must take place no later than 28 January 2025. However, the Tories may opt to bring the election date forward to improve their chances: their approval rating is declining in many polls (their July POLITICO rating is down from 32% in July 2022) due to concerns among the electorate over issues such as illegal immigration. There is speculation that the election date could potentially be brought forward to as early as autumn 2023.

What impact could Labour’s draft manifesto policies have?

Some of the key policies in Labour’s draft election manifesto are listed below, with analysis of the potential implications:

Reform the energy market: While this could mean a cull of surplus profits from some energy suppliers, an injection of cash into nuclear and green generation may be good for industrials. Reforms could also deliver cheaper bills for consumers and businesses.

Upgrade every home that needs it to EPC standard C within a decade by installing energy-saving measures such as loft insulation, going street by street in locally-delivered programmes: Home insulation would be good for the house construction industry who would probably get the installation contracts.

Use regulatory powers to keep consumer bills down and ensure that water companies – rather than the public – pay for their failures. Ensure illegal activity is punished and ensure payments of dividends are linked to key performance metrics: This is likely to mean much heavier regulation and pro-consumer financial initiatives. 

Set ambitious targets to cut sewage outflows: Utilities companies that are unable to meet the targets are likely to see their performances affected.

Have iron-clad fiscal rules: Taxes could rise as a result of more spending and tighter fiscal regulation.

Give financial services the certainty they need to invest in the jobs and businesses: The quoted financial sector could benefit from this policy.

Reform the UK tax system: This could mean more taxation of corporates and non-domiciled residents.

Bring our railways into public ownership as contracts with existing operators expire, consistent with our fiscal rules, putting passengers at the heart of our railways and investing in a world–class network: Invariably this would be bad news for rail franchises, but could be good news for commuters and other passengers.

Boost homeownership and housebuilding: This would clearly provide a boost for the home building sector.   

How could a Labour win affect FTSE100 sectors, and stock markets overall?

Consumer goods and home construction could be the sectors most positively affected by policies in the current draft Labour manifesto. Conversely, consumer discretionary products, energy and utilities may see a more negative impact.

The average performance of the FTSE All-Share Index under Labour governments is -3.9%, compared to 11.1% for the Conservatives. While this is a large difference, there is no compelling proof that stock markets perform better under either party – some of Labour’s periods of tenure at number 10 have coincided with weaker global markets, and this arguably has had a greater impact than its domestic policies.   

Past performance is not a reliable indicator of future returns. The value of investments and the income from them can fall as well as rise. The content of this article is for information purposes only. Any views expressed are those of the author. 

Bespoke Discretionary Portfolio Management

Discretionary Portfolio Management

Understanding Finance

Helping clients understand what we do is key to building relationships. To explain some of the industry jargon that creeps into our world, we’ve pulled together a section of our site to help.

Related articles