Friday saw the UK wake up to a Labour Government for the first time in 14 years. Whatever your political allegiance, the country, and businesses that operate within it, will be looking to assess what a post election Britain looks like.
Here, we’re going to look at key ideologies outlined in the Labour manifesto and how they impact businesses within the UK.
First, let’s consider what the new tenants at No10 have inherited. Although the UK economy has been performing a little better, such as recent data indicating inflation eased to 2%, there remains work to be done to maintain direction of travel. Positively, there is forecasted growth of 0.5% this year, rising to 0.9% in 2025. With inflation seemingly back on track, KMPG’s commentary suggests interest rates to fall towards 3% by the end of next year which would evidently be positive news.
bpesearch has a strong history in the Financial Services, Retail and FMCG sector and when asked about how Labour’s plans will impact the economy and business, Richard Walker OBE, Executive Chairman of Iceland, said:
“Labour’s plan for the economy is good news for my customers and colleagues in high streets across the country. Labour will bring stability, good jobs and higher living standards. I am absolutely convinced that Keir Starmer is the right leader to deliver the change this country has been crying out for. Labour will end the division, strengthen our communities and protect the environment.”
But how exactly will Labour’s policies impact business?
- Regional Growth and Inclusivity
Labour’s commitment to regional development and inclusivity promises to decentralise economic growth from London and Edinburgh to other parts of the UK. This approach aims to balance economic activities, promoting growth in underdeveloped regions. Businesses in these areas can expect improved infrastructure, better access to financial resources, and enhanced support from local governments. The emphasis on scaling regional financial centres and unlocking the potential of the mutuals sector could foster a more inclusive and equitable business environment, aligning well to levelling-up.
- Regulatory Reforms
Labour’s manifesto includes significant regulatory reforms designed to streamline processes and enhance the competitiveness of the UK’s financial services sector. These reforms will focus on reducing bureaucratic red tape and fostering innovation. For businesses, this means a potentially less cumbersome regulatory environment, making it easier to navigate compliance requirements. The plan to build on last year’s Financial Services and Markets Act by ensuring financial services regulators consider the needs of mutuals, indicates a move towards a more balanced regulatory framework.
- Consumer Protection and Financial Inclusion
Labour’s focus on consumer protection and financial inclusion could bring about substantial changes in how businesses are required to operate. The regulation of the “Buy Now Pay Later” (BNPL) sector and the introduction of longer-term fixed-rate mortgages are steps towards safeguarding consumers and promoting financial stability. For business, especially those in the financial services sector, these changes will mean adapting to new regulatory standards and potentially revising their product offerings. Enhanced consumer protection measures are likely to increase consumer confidence, thereby boosting spending as well as investment.
- Green Initiatives
One of the cornerstone policies of the new Labour government is positioning the UK as a global hub for sustainable finance. Businesses can expect new opportunities in the green finance sector, including support for retrofitting homes and investments in renewable energy. The focus on creating a credible and transparent green finance regulatory framework aims to attract international investors and drive the UK towards a low-carbon economy. Companies involved in sustainable technologies and green projects stand to benefit significantly from these initiatives.
Businesses operating within the sustainability space will be heartened by our new government’s pledge to make Britain a clean energy superpower. With a commitment to achieve Net Zero by 2050, organisations in the alternative energy space will be keeping a close eye on any policy aimed at accelerating the transition towards a sustainable future. Similarly, with the sale of new petrol and diesel cars to end in 2030, those within the car manufacturing space and others across their supply chain, will be listening for any regulatory, legislative or policy changes which encourage consumers in transitioning to electric vehicles.
- Innovation and Fintech
Labour’s vision for the future of financial services places a heavy emphasis on innovation, particularly in fintech and AI. The government’s commitment to developing a regulatory sandbox for financial products and advancing Open Banking and Open Finance initiatives signals strong support for technological advancement. Businesses in the tech and financial sectors can anticipate a more conducive environment for innovation, with increased opportunities for growth and collaboration. The move towards a central bank digital currency and securities tokenization also points to a future where digital and decentralised finance will play a leading role.
- Capital Markets and Investment
With our first ever female chancellor of the exchequer at the wheel, policies aimed at reinvigorating capital markets include reviewing the pensions and retirement savings landscape, enhancing investment in growth capital, as well as encouraging institutional investment in VC and small-cap growth equity. These measures are designed to boost domestic investment and create a more dynamic and resilient economy. Businesses, particularly startups and SMEs, may find it easier to access funding and investment, some of whom, until now, feel they have been held back in driving innovation and expansion.
- Industry
Public investment will be utilised to create new jobs across the country, resulting in British taxpayers reaping the benefits of economic growth funded via the National Wealth Fund.
Capitalised with £7.3 billion over the course of the next Parliament, the National Wealth Fund will support Labour’s growth and clean energy missions, helping to create transformative investments across the country. The fund will have a target of attracting £3 pounds of private investment for every £1 pound of public investment, creating new across the country. The party plans to allocate:
- £1.8 billion to upgrade ports and build supply chains across the UK
- £1.5 billion to new gigafactories so our automotive industry leads the world
- £2.5 billion to rebuild our steel industry
- £1 billion to accelerate the deployment of carbon capture
- £500 million to support the manufacturing of green hydrogen
- Business tax
Labour promises to publish a roadmap for business taxation, enabling businesses to plan investments with increased confidence. It will also cap corporation tax at the current level of 25 per cent, the lowest in the G7 and said it will act if tax changes in other countries pose a risk to UK competitiveness. The party will retain a permanent full expensing system for capital investment and the annual investment allowance for small business, giving firms greater clarity on what qualifies for allowances to improve business investment decisions. Additionally, it will return to just one major fiscal event a year, which it says would give ‘families and businesses due warning of tax and spending policies’.
- Skills
A Labour Government would create higher-quality training and employment paths by empowering local communities to develop the skills people need, with employers being put ‘at the heart of our skills system’. This is in a bid to rectify the skills shortage many industries have experienced for many years. Skills England would be established to bring together business, training providers and unions with national and local government to deliver a highly trained workforce.
The new Labour government’s policies present a mix of opportunities and challenges for businesses across the UK. By focusing on regional growth, regulatory reform, consumer protection, sustainable finance, innovation, and capital markets,they aim to create a more inclusive, competitive, and resilient economy. Businesses that adapt to these changes and align with the government’s vision stand to benefit from a supportive and dynamic business environment. As these policies unfold, it will be crucial for business leaders to stay informed and agile to navigate the evolving landscape effectively.
