As Britain gears up for an upcoming election, executives in the City of London are hopeful that a new government will prioritize their needs and bring stability to the political landscape. Despite the likelihood of a Labour Party victory, business leaders in London’s financial sector are relatively calm about the potential outcome.
The finance community has faced challenges in recent years, including tensions with former Conservative Prime Minister Boris Johnson over Brexit concerns. However, relations between the government and the finance sector have improved since then. Nevertheless, factors like Brexit, political turmoil, and economic uncertainty have taken a toll on an industry that contributes significantly to the UK’s tax revenue.
The disastrous ‘mini-budget’ in September 2022 under former Prime Minister Liz Truss has not been forgotten, as it caused government bond yields to soar. While the UK remains a top global destination for finance investment, foreign investment in its financial services has decreased, and the London stock market is struggling to attract new listings.
Industry leaders are hopeful that a new government will implement reforms to enhance the City’s competitiveness and attract more global interest. They also hope for measures to unlock pension funds for long-term investments. Regardless of the election outcome, it is crucial for the government to continue driving constructive reforms, such as addressing issues like stamp duty on UK equity trades.
The Labour Party, led by Keir Starmer, has shown openness to the industry’s needs and has engaged in dialogue with banks and investors to bolster the sector’s competitiveness post-Brexit. Labour’s plans for the financial sector seem to align with some of the government’s reforms, although adjustments may occur as campaigning progresses.
A Labour government would face similar financial constraints as the current administration and would rely on private investors to support investments in housing and energy transition. Recognizing the vital role of financial services in the economy is essential for future success and long-term investment in the UK.
Executives in the financial sector are eager for a new government to enable British institutional investors to invest more in domestic infrastructure and enterprise. Reforms to lift restrictions like the European Union’s Solvency II rules could facilitate greater investment in projects like airports and roads. Encouraging pension funds to invest in infrastructure is also seen as a priority.
Overall, British banks and investors are cautiously optimistic about a potential change in government. Speculation on windfall taxes has not gained traction, and plans to sell taxpayer-owned shares in NatWest remain on the agenda. While uncertainties exist, the industry believes that any announced taxes and surcharges will be manageable. Equity investors have shown limited concerns about a change in government, indicating confidence in the sector’s resilience.