05 Jul 2024 2 min read

UK election: Implications for investors

By Sonja Laud , Christopher Jeffery , James Carrick

We weigh what the Labour win means for the macro outlook and what the vote tells us about longer-term themes.


The UK election has just concluded with a stark, if not wholly unsurprising result: the Labour party has won a landslide victory, ending 14 years of rule by the Conservatives.

Apart from moderate gains in certain UK domestic stocks, such as housebuilders, the overall market reaction has been muted – suggesting investors had largely priced in such an outcome.

Before we weigh the longer-term investment implications, it’s worth noting that where such risk events affect the assets we manage, we focus on managing risk to achieve our clients’ long-term objectives.

Our overall approach is best summarised by the motto: 'prepare, don’t predict'. This means we undertake rigorous scenario planning, rather than seek to forecast outcomes.

Unlocking investment

Elections matter to markets when they usher in changes to the outlook for growth, inflation and, as a result, monetary policy.

In fiscal terms, the plans outlined in the Labour manifesto do not suggest a dramatic departure from the outgoing Conservative administration’s stance. We will be awaiting the Budget later this year for more direction on this front, even though the deficit means there is little wiggle-room.

One possible ‘rabbit-in-a-hat’ moment could be an overhaul of planning reform. If the new government manages to achieve this, alongside unlocking private sector investment and ushering in a sustained period of political stability, it could lift economic growth over the medium and long term. This, in turn, would likely boost sterling, in our view.

Gilts are likely to take their cue from the Bank of England, which we anticipate will begin cutting interest rates during the second half of 2024 – possibly as soon as August.

Beyond those domestic sectors affected by specific policies unveiled over the coming weeks and months, we expect UK equity and credit markets in aggregate to continue to reflect global factors, given that much of their revenues is derived internationally.

The rise of Reform

There are some important parallels between this election and others that have taken place elsewhere around the world, or are scheduled for later this year.

The strength of the Reform party in the UK speaks to the gains by Marine Le Pen’s National Rally in France – and the topics that are already dominating the presidential campaign in the US. These include inequality and immigration, issues on which large numbers of voters appear to be expressing frustration.

On a longer-term view, as we noted in our spring update, we believe uncertainty and change are probably the only two constants investors can expect. That’s because we’re all adjusting to a multi-polar world, during a period of technological advances, demographic challenges and geopolitical strife.

This makes diversification[1] more important than ever, in our view, to help withstand a range of economic scenarios – and mitigate the impact of any single market event.

Listen to a discussion of the election by the authors of this post on LGIM Talks here.


[1] It should be noted that diversification is no guarantee against a loss in a declining market

Sonja Laud

Chief Investment Officer

Sonja is CIO of LGIM, having joined the business in January 2019 as Deputy CIO with responsibility for LGIM’s Solutions, Global Fixed Income, and Active Equity teams. Sonja joined from Fidelity International where she held the title of Head of Equity, responsible for the Global, Equity Income and UK Portfolio Managers as well as the Investment Director team.

Sonja Laud

Christopher Jeffery

Head of Macro, Asset Allocation

Chris is Head of Macro within LGIM’s Asset Allocation team. He oversees LGIM’s Economic Research, Rates and Inflation, and the Multi-Asset Strategists and idea generators. He joined LGIM in 2014 from BNP Paribas Investment Partners where he worked as a senior economist and strategist within the Multi-Asset Solutions group. Prior to that, he worked as an economist within monetary analysis at the Bank of England with a focus on the UK domestic economy. Chris graduated from University College, Oxford in 2001 with a first class degree in philosophy, politics and economics. He also holds an Msc in economics (research) from the London School of Economics and is a CFA charterholder.

Christopher Jeffery

James Carrick

Global economist

James is a global economist with a knack for using analogies to explain economic concepts. He is a techno-optimist and an early adopter. He enjoys building models - both of the economy and robot Lego ones with his son. He also likes crunching data and chocolate bars. He joined in 2006 from the number-one ranked economics team at ABN AMRO with prior experience at HM Treasury.

James Carrick