With the general election a matter of days away, the impact on financial markets is likely to stay minimal unless it results in a minority administration or coalition, says Hargeaves Lansdown.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Even a Labour super-majority is unlikely to dramatically unsettle investors. It would enable the new government to get on with their agenda, which has largely been digested by markets. Anything other than Labour dominance is more likely to be unnerving given expectations. It could weaken the position of Keir Starmer and his ministers and hamper their ability to drive change.”
Hargreaves Lansdown said shadow chancellor Rachel Reeves has already signalled her intentions to focus on being economically responsible,with a view to stimulating long-term growth rather than immediate boosts to consumer spending power.
Streeter said: “The priority will be on keeping the waters calm in the aftermath of the election, even with a super-majority. There is more of a risk of market turbulence after a few years of a new government bedding in, especially if the economy took a turn for the worse and the tax take dips. It would be very hard for Labour to cut services and do anything drastic with public spend and they appear to be in a bit of a tight spot with their fiscal commitments.”
However, questions remain over the future of capital gains tax and the British ISA. There has been speculation that Labour could look to increase CGT in the future, but it is still far from clear if this would happen and what form it would take.
Similarly, the future of the British ISA also remains unknown. Both Labour and the Conservatives have said they want to encourage saving and investing, although Hargreaves Lansdown said this could be achieved through lifting the overall ISA allowance rather than introducing another product to market.
Streeter commented: “If the aim is to make investing in UK equities more attractive, there are other measures which could be used. All too often, retail investors are cut out of IPOs and secondary capital raising rounds. It’s essential that the FCA Review of the listing regime puts improving retail investors’ rights at its heart. There was no mention in the manifestos of cutting stamp duty on UK share purchases or increasing the dividend or capital gains tax allowances, which may disappoint some investors.”
Hargreaves Lansdown said it would also like to see progression on the Natwest share sale, which has been put on ice due to the general election campaign. The Conservatives made reference to it in their manifesto, however, it was omitted from the Labour manifesto.
According to Streeter, schemes like this have the power to encourage new investors, with Hargreaves Lansdown research showing that past privatisation schemes brought in newcomers and super-charged investing habits for many novice shareholders.
As the nation awaits the outcome, Streeter said investors should adopt a ‘keep calm and carry on’ attitude in the run up to and aftermath of the election.
“Keep your eye on long-term goals and stay diversified across a range of sectors, asset classes and geographies,”she added.
