Labour Party in United Kingdom Wins Election
On Friday Goldman Sachs upgraded its growth forecast for the U.K. after the victory of Labour Party in the General Election of Country.
According to the investment bank, Labour’s fiscal policy agenda is expected to provide a “modest boost to demand growth in the near-term.” As a result, Goldman Sachs has increased its gross domestic product (GDP) forecasts for the UK by 0.1 percentage points for both 2025 and 2026
The U.K.’s FTSE 100 was up 0.29% by 10:30 a.m. local time on Friday as investors reacted to the election results.
The FTSE 350 household goods and home construction index was up 3.81%. Looking at individual stocks within the sector, Persimmon shares were up 4.65%, Taylor Wimpey rose 4.2%, Barratt Developments climbed 3.45% and Bellway moved 2.93% higher.
Labour passed the threshold needed to govern alone as outgoing U.K. Prime Minister Rishi Sunak conceded defeat on Friday Morning. Keir Starmer, leader of the center-left Labour, will become the country’s next prime minister and declared victory in the early hours.
JPMorgan said on Friday that “Labour intends to relax planning regulations and implement other reforms fairly quickly.”
“This could spur growth to some degree, but the magnitude is likely to be small and take time to occur,” the investment bank said.
Labour Party Fiscal Policy Agenda United Kingdom
- Budget Balance: The current budget must move into balance, ensuring that day-to-day costs are covered by revenues. Debt must also decrease as a share of the economy by the fifth year of the forecast.
- Revenue Measures: Labour aims to raise additional revenue through various policies, including:
- Closing non-dom tax loopholes and investing in reducing tax avoidance.
- Applying VAT and business rates to private schools.
- Implementing a windfall tax on big energy companies.
- Public Services Spending: Labour’s additional public services spending includes:
- Funding 40,000 more operations, scans, and appointments weekly.
- Doubling the number of NHS CT and MRI scanners.
- Providing free breakfast clubs in every primary school.
- Investing in mental health support for schools and young people.
- Green Prosperity Plan: This plan will be funded partly by a windfall tax on oil and gas giants with record profits. Responsible borrowing will also be used for catalytic investment within Labour’s fiscal rules.
Factors Impacting the United Kingdom Economy
- Globalization: The interconnectedness of economies worldwide affects trade, investment, and economic growth in the UK.
- Government Policies: Decisions made by the UK government, such as fiscal policies (taxation, public spending) and monetary policies (interest rates), significantly impact economic stability and growth.
- Deindustrialization: The decline of traditional manufacturing industries has shifted the UK’s economic landscape, affecting employment and regional development.
- Brexit-Related Uncertainties: The UK’s exit from the European Union has introduced uncertainties around trade agreements, regulations, and market access.
- Weaker Global Growth: Economic slowdowns in other countries can spill over into the UK economy, affecting exports and investment.
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