Labour have won the 2024 UK General Election and Sir Keir Starmer has been appointed prime minister. Here’s what a new Labour government could mean for your money.  In this article, experts at Armitage Wealth outline their thoughts on the short-term impact of the UK election.

At a glance

Labour’s expected electoral victory could lead to a short-term uplift for UK shares although the election outcome is unlikely to influence the short-term trajectory of interest rates or inflation.

Labour’s five missions will be top of the to-do list:

1. Kickstart economic growth
2. Make Britain a clean energy superpower
3. Take back our streets
4. Break down barriers to opportunity
5. Build an NHS fit for the future

Although Labour has some big plans, it will likely face financial constraints, with Rachel Reeves as the first female chancellor of the exchequer.

First in her inbox will be a tough look at the nations’ balance sheet where she has set firm fiscal rules that day-to-day costs are met by revenues and debt must be falling as a share of the economy by the fifth year of the forecast.

A budget isn’t expected until autumn. However, revenue raisers like VAT on private school fees and an increase of the windfall tax on oil and gas extraction are expected on the agenda in her first fiscal event.

The chancellor will also be responsible for creating the conditions for productivity rises and ambitious growth in comparison to the G7.

Market sectors

Within the UK market, sectors like infrastructure and defence may experience a boost over time from the election result. Labour’s manifesto outlined spending intentions in areas such as £24 billion on green initiatives. It also indicated it will set out a path to spending 2.5% of GDP on defence. The energy sector, on the other hand, may experience some volatility until greater clarity is seen with respect to what, if any, windfall tax changes may be implemented.

Housing market

As the new Government is formed, all eyes will look to see what the impact will be on the UK housing market. Among Labour’s pledges ahead of the election was a commitment to building 1.5 million homes in the next Parliament. That equates to some 300,000 homes yearly – a pace of housebuilding not seen since the 1960s.

The cost-of-living crisis and inflationary pressures has put pressure on people’s finances and made it harder for people to get on the housing ladder due to affordability constraints and more people having a less than perfect credit history.

Rates and inflation

UK inflation was already falling this year. And the Bank of England had flagged its next move was likely to be a rate cut before the election, even though this didn’t happen and interest rates have remained frozen at 5.25 per cent since August 2023.

However, compared to 1997, growth today is lower and inflation is higher. The economic backdrop for the new Government is also more challenging, with a wider deficit, and significantly higher level of debt.

All eyes are on the next Bank of England base rate decision on 1^st August 2024.

Summary

Building trust today should pay off over the four to five years that this government will run for.

Financial planning helps you to determine whether you are on track to meet your goals and outlines their path to overall financial success.

An expert adviser can help you to establish your goals, assess your financial situation, and guide you through a financial plan by finding the most suitable recommendations for your circumstances.  Find out more here > https://armitagewealth.co.uk/how-we-work/

Important information – This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek financial advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in. ISA, Pension and tax rules can change, and their benefits depend on your circumstances.