The centre-left Labour Party achieved a landslide victory, winning 412 of the 650 seats in the House of Commons and securing a majority of 174. This victory marks a significant change in British politics, ending the Conservative Party's 14-year rule. Keir Starmer, leader of the Labour Party, is now the 58th Prime Minister of Britain, and this news has had several knock-on effects on the stock market. In this article, I am going to run you through the stocks that
are likely to increase as a result of Keir Starmer, and the Labour Party being elected.
Housebuilding Stocks
Expected Benefits: Analysts predict that housebuilding companies will benefit significantly from Labour's policies. The new Chancellor, Rachel Reeves, emphasised boosting construction in her first speech, promising reforms to the planning system and targeting the construction of 1.5 million homes over the next five years. This compares favourably to the 1.05 million homes built under the previous Conservative government.
Positive Market Reactions: Shares in British housebuilders rose by about 2.5% the day after the election. Specific companies expected to benefit include:
MJ Gleeson
Bellway
Vistry Group
Barratt Development
Supporting Sectors: Other companies related to housebuilding, such as materials suppliers like Travis Perkins and furniture retailers like Dunelm, are also likely to see positive impacts due to the "multiplier effect" of increased housing activity.
Infrastructure Stocks
Policy Highlights: Labour has promised significant investments in infrastructure, including ending the ban on new onshore wind farms and bringing them under the Nationally Significant Infrastructure Projects regime.
Investment Opportunities: Funds and companies likely to benefit include:
Greencoat UK Wind
The Renewables Infrastructure Group
JLEN Environmental Assets
Infrastructure companies that build public facilities like hospitals, transport systems, and energy grids are also expected to benefit. Examples include:
Kier Group
Serco
Utility Stocks
Nationalization Risks: Labour's nationalization plans for water and rail services present risks for companies in these sectors. Key targets include:
FirstGroup (rail services)
Trainline (rail ticketing)
Severn Trent
United Utilities
Pennon Group (water services)
Energy Stocks
Great British Energy: Labour's plan to create Great British Energy, a publicly owned energy generation company, aims to boost the UK's clean energy sector. This initiative, however, caused shares in energy companies like Drax and Centrica to fall when initially announced.
Funding Sources: The plan will be funded by the current windfall tax on UK-based energy companies. Larger multinationals like BP and Shell may be less affected, but smaller operators like Harbour Energy face challenges.
FTSE 100 and FTSE 250
Election Impact: Historical data suggests that the FTSE 100 tends to move positively leading up to a general election if the result is fairly certain. Labour's victory is seen as a potential turning point, improving the appeal of UK assets and reducing political uncertainty.
Investment Opportunities: Many stocks expected to benefit from Labour’s policies belong to the more domestically focused FTSE 250. Key companies include:
Balfour Beatty
Bellway
Crest Nicholson
Currys
Dunelm
Hollywood Bowl
Mitchells & Butlers
Redrow
JD Wetherspoon
Currency and Macroeconomic Factors
GBP/USD: Labour's policies, particularly regarding borrowing and investment, could impact the GBP/USD exchange rate. Interest rate decisions by the Bank of England and the Federal Reserve remain significant factors. A potential rate cut by the Bank of England could affect inflation and import prices.
Healthcare Stocks
NHS Investment: Labour has pledged increased investment in the NHS, which could benefit both drugmakers and medical device manufacturers. Key companies include:
AstraZeneca
GlaxoSmithKline
Smith & Nephew
Spire Healthcare
Broader Market Implications
Investor Sentiment: Analysts suggest that Labour’s victory may enhance the UK's international investment appeal, especially for small and mid-cap shares. However, much of the expected positive effects may already be priced in. Long-term market performance is often more influenced by valuations and broader economic conditions than by the political party in power.
Stocks That Went Down
Railway Stocks:
FirstGroup
Trainline
Utility Stocks:
Severn Trent
United Utilities
Pennon Group
Energy Stocks:
Drax
Centrica
Harbour Energy
However, I believe that the stock with the biggest potential is one I haven't mentioned yet - BAE Systems, the UK's largest security and defence contractor. This is because Starmer has also promised to increase UK defence spending to 2.5% of GDP ‘as soon as resources allow' , which is due to the geopolitical instability with the Russia-Ukraine war and conflicts in the Middle East. BAE Systems has very recently been awarded a 10 year contract worth £270 million to support the Royal Navy's three main radar systems: Artisan; Sampson; and Long Range Radar (LRR), highlighting their close relationship with the UK Government. However, it is likely that other defence companies, like Babcock could be winners of the contract. Also, the timing is perfect for investing in these firms - it will take a few months for resources to allow Starmer to boost the defence industry, meaning that it will take time for these policies to materialise fully. During this period, stock prices may reflect initial uncertainty and market reactions, potentially presenting a buying opportunity for investors.
Thanks for reading this blog! Remember to always do your own research before investing and most importantly - only invest what you can afford to lose! I hope you use these insights effectively - and with that, Happy Investing!