Investment Institute
Market Views

UK General Elections: A one horse race to Number 10

KEY POINTS
Since UK PM Rishi Sunak announced there would be a snap general election on 4 July, little has changed in the polls. Labour looks set to win with a comfortable majority – with some even suggesting a landslide victory.
The Labour party is focused on supply-side reforms – including shaking up the planning system and investing in the green transition – while the Conservatives have pledged to cut taxes and reform the welfare system.
Both major parties have committed broadly to the same fiscal rules and have ruled out raising the three main taxes: National Insurance, Income tax and VAT. They will retain the freeze on income tax thresholds for at least the next three years and implicitly will be frugal on spending.
The stark reality of the public finances, however, will likely require the next government to implement additional fiscal tightening but we believe there may be some economic benefit to such an approach.

UK Prime Minister Rishi Sunak surprised even the keenest political watchers by announcing that the next UK general election would be on 4 July, earlier than the expected October/November date. A key question was why the earlier election? One answer was probably that things were unlikely to get much better for the Conservatives.


On the economic front, Sunak was likely buoyed by the chunky 0.6% quarterly rise in GDP in the first quarter (Q1) and the drop in inflation back to within the 0.5% range either side of the 2% target in April (now at target). Two of his five main pledges were to halve inflation and boost growth. Moreover, the timing was likely aimed at catching the opposition off guard, although interestingly this might have been less targeted towards Labour – who have been prepared for an election all year – but more so at Reform UK.


The gamble doesn’t appear to have paid off. Polls suggest Labour is still on track to win a significant majority, while Reform UK is closing in on the incumbent party. In this paper we examine the current polling and consider what this will mean for government formation; we run through the key main policy differences; and discuss the stark reality of the public finances facing whoever wins on 4 July. We then consider some broad market implications.

Download full article
Download report (381.49 KB)

    Disclaimer

    This website is published by AXA Investment Managers Asia (Singapore) Ltd. (Registration No. 199001714W) for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation or particular needs of any particular person and may be subject to change without notice. Please consult your financial or other professional advisers before making any investment decision.

    Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Past performance is not necessarily indicative of future performance.

    Some of the Services and/or products may not be available for offer to retail investors.

    This publication has not been reviewed by the Monetary Authority of Singapore.