Key events
Labour has sought to position itself as a pro-business party since Keir Starmer became leader in 2020, and has put the economy and business at the centre of its pitch to voters.
In a letter in May, 121 founders, chief executives and former leaders from financial services, retail and manufacturing firms backed Labour’s economic plans.
John Roberts, chief executive of electrical retailer AO World, said the business sector had some “clarity” following Labour’s win and called on the new government to deliver on its “clear mandate”.
He said the Conservatives have been “dysfunctional for some time” and added he was “hopeful” for the country and business sector under a change of government. He told the PA news agency:
There’s a really clear mandate for what is finally an elected leader to go and deliver.
Alex Baldock, chief executive of the electrical retailer Currys, urged Labour to follow through on its manifesto promise to replace business rates and overhaul business taxation.
He said:
Retailers are looking for stability, of course, but also for the government to provide the conditions for growth, through better skills, infrastructure and planning.
Most of all, we must urgently fix the broken, damaging and unfair burden of business rates. We urge the government to consult and act on all of this and, as they do so, we at Currys will engage with them all the way.
Retail, energy, hospitality bosses urge Labour to prioritise economic growth
Bosses across the retail, energy and hospitality sectors have urged the incoming Labour Government to fulfil its pledge of prioritising economic growth after Sir Keir Starmer’s election victory.
Starmer and the Labour Party are preparing to form a government after routing the Conservatives in yesterday’s general election.
Greg Jackson, founder of the UK’s biggest energy provider Octopus, said the result was a “landslide for a green economy”.
Voters have rejected anti-net zero rhetoric and chosen cheaper, cleaner, more secure energy.
Jackson has previously expressed support for Labour’s plan to set up a state-owned energy investment company, GB Energy, which is a central part of Labour’s pitch to decarbonise the UK by 2030.
Jackson told the Guardian:
This is a golden opportunity for a Labour government to deliver bold reforms which can unleash green growth. And the sooner they start, the sooner these changes can bring benefit to the UK. Planning reform is arcane and complex and challenging, but this is the key to kickstarting growth.
Shell warns of $2bn writedown on biofuel project and refinery
Jillian Ambrose
Shell has warned investors that it will take an impairment charge of up to $2bn in its next set of results after it was forced to halt work on Europe’s largest biofuel project and sell off a Singapore refinery.
Shell told investors to expect a non-cash writedown of between $600m and $1bn when it publishes its second-quarter results next month due to trouble at a major biofuel project in Rotterdam in the Netherlands.
The company expects to take a hit of between $600m to $800m on the Singapore refining and chemicals hub that it agreed to sell in May.
The company’s share price slipped from 2,917.50p a share as markets opened to 2,897.50p, broadly in line with its trading levels earlier this week.
Shell said on Tuesday that had “temporarily paused” the construction of a major biofuel plant in Rotterdam in the Netherlands which was expected to convert waste into green jet fuel and biodiesel by the end of the decade.
The oil giant’s biggest energy transition project has struggled with technical difficulties that have delayed its progress so far. It had expected to start producing up to 820,000 tonnes of biofuels a year in April, before this was pushed back to 2025.
Susannah Streeter, head of money and markets at Hargreaves Lansdown said that given the poll forecasts, the Labour landslide “caused few ripples on financial markets”.
The lack of movement was unsurprising given that the overall result had already been priced in. However, the domestically focused FTSE 250, gained more ground, with a little more confidence swirling about the UK’s prospects.
Nevertheless, with an estimated 34% of the vote, Labour still took the lowest share for a governing party in history, with the Conservatives at 24% and Nigel Farage’s far-right Reform UK party at 14%.
Streeter said:
There may be a honeymoon period for the new administration, but then difficult decisions will have to be taken in office. The size of the victory and the upswell of support for smaller parties and independents will leave Labour MPs concerned about the safety of their seats at the next election. They know they have to deliver for the electorate but are likely to be hampered by a commitment to be fiscally responsible and restrain spending.
The priority will be keeping the markets unruffled in the first days, weeks and months of the new administration and not overdoing spending pledges. There may be some tinkering with the borrowing rules at some point in the future, to distinguish between day-to-day spending and investment, to propel long term growth, potentially loosening the purse further ahead.
So far, this doesn’t seem to have perturbed the debt markets, with bond investors still appearing to be more sensitive to interest rate speculation than the investment plans of an incoming government. 10-year gilt yields barely changed, hovering around 4.2%, down from almost 4.7% last October.
This result comes on the heels of a steady rise for the UK market, retaking its crown as Europe’s most valuable for the first time in nearly two years last month. With political turmoil in France now taking centre stage, the UK looks finally set to enter into a period of financial stability which has the potential to spark renewed investor interest in UK assets.
FTSE 250 jumps 1.8% to two-year high
While the FTSE 100 rose by 0.3%, the more UK-focused FTSE 250 index is storming ahead after Labour’s election victory, rising 375 points to 20,985, a gain of 1.8% and taking it to its highest level since April 2022.
Victoria Scholar, head of investment at interactive investor, explained:
A Labour government could pave the way for an outperformance of more domestically focused mid-cap stocks if Keir Starmer’s party works to ensure fiscal stability and helps to lift confidence in the UK economy.
Starmer will inherit a significantly improved economy with inflation now back down to the 2% target, retreating from 2022’s 41-year highs and with UK growth back on track again after last year’s short shallow recession. There could also be a further boost to economic confidence next month for Labour if the Bank of England finally decides to start cutting interest rates, potentially paving the way for a notable reduction in mortgage costs over the next year.
Shares across Europe have climbed to more than one-week highs. The pan-European Stoxx 600 index rose 0.4%, boosted by technology stocks (up 0.9%). Germany’s Dax has gained 0.7% while France’s CAC is 0.4% ahead (after closing 0.8% higher yesterday) and Italy’s FTSE MiB increased by 0.5%.
Shares in Aixtron, a German supplier to the semiconductor industry, rallied more than 15% after it reported strong second-quarter orders.
Turning to the pound, which is now trading 0.15% higher against the dollar at $1.2778, Scholar said:
The election outcome alleviates some of the UK’s recent political uncertainty, providing a small uptick for the British currency against the US dollar – it is now the strongest performing currency against the greenback this year.
Meanwhile sterling is also in the green against the euro, reflecting not just the sense of hope around the incoming Labour government but also the uncertainty around France’s political future which has been weighing on the eurozone’s common currency.
Labour has won the largest landslide since 1997, in line with polling trends in recent weeks. Jefferies economists say that for all the UK’s challenges, “it is arguably better positioned than for years, with cheap valuations, recovering GDP growth and lower policy volatility. We see this political change as a major positive for UK housebuilders”.
Jefferies analysts led by Glynis Johnson said:
For UK housebuilders, it’s less about the variation in macro outcome as a result of who wins, but more that a government led by Labour appears more supportive, engaged & focused on delivery of homes.
The UK Home Builders Federation (HBF) reports it has had a lot of engagement with the Labour Party in the past year, with meetings and updates with the Labour leader, chancellor, deputy leader & secretary of state for housing, housing minister as well as a wide range of prospective parliamentary candidates. HBF reports that across these interactions, the Labour Party message has been consistent—Labour is looking to appear positive for business as a whole, but in particular positive on planning, seeing it as a barrier not just to housing, but a range of drivers of economic growth as a whole.
Sector-specific policy from Labour appears a distinct positive and Labour’s planning ambitions in its manifesto we believe could fuel land release to underpin the next cycle of profits for the UK housebuilders. The lack of credible large-scale demand support in its manifesto doesn’t add additional nitro to this upside. But with valuations only reflecting current very moderate house price inflation, our analysis suggests neither the benefit of rate cuts over summer nor this potential land opportunity is in share prices.
Here is our full story on the markets:
UK housebuilders lead gains on FTSE 100
UK housebuilders are leading gains on the FTSE 100 index, which is now trading 0.4% higher, up 31 points at 8,272.
Persimmon, Vistry Group, Taylor Wimpey and Barratt Developments are among the top risers, rising between 1.7% and 2.5%. The UK housebuilders’ index rose around 2%.
The FTSE 250 index, which is more UK-focused than the FTSE 100, has notched up a 0.8%.
Analysts at Investec said they expect the new government to restore mandatory housebuilding targets, streamline the planning system and increase the amount of social and affordable housing being built.
Housing was a key part of the Labour election manifesto, where they pledged to build 1.5m new homes over the next five years.
FTSE 100 rises 0.3% at the open
Boom! And we’re off.
The UK’s FTSE 100 rose some 20 points, or 0.3%, to 8,265 at the open — as expected. The Labour victory had long been priced into financial markets.
In the rest of Europe, France’s CAC rose 0.3% and Germany’s Dax climbed 0.4% in early trading.
Sterling is holding steady, trading slightly higher against the dollar and the euro at $1.2762 and €1.1796.
Government bond prices also rose, pushing the yield (or interest rate) on the 10-year gilt down 3 basis points to 4.17%, broadly in line with other European markets.
Goldman Sachs raises UK growth forecasts
Goldman Sachs has raised its 2025 and 2026 economic growth forecasts for the UK following Labour’s resounding election victory.
Goldman Sachs strategists led by Sven Jari Stehn said:
Firmer demand is likely to result in marginally higher wage growth and inflation, but the magnitudes involved suggest that the implications for the Bank of England are likely to be limited.
