Labour’s thumping majority sparked little reaction in the markets on Friday morning with analysts suggesting the election results were already priced in.
The results confirmed that Labour won a landslide majority while the Conservatives look set to slump to the worst performance in their history.
Sterling was trading up around 0.1 per cent this morning at $1.277 while futures on the FTSE 100 edged up by around 0.2 per cent. Markets will open at 8am.
“UK markets haven’t reacted much to the result, as the outcome of a Labour majority was widely expected beforehand,” Deutsche Bank’s Jim Reid wrote in a note to clients.
Lindsay James, investment strategist at Quilter Investors agreed. “Businesses and investors have foreseen this result for some time and have been comfortable with the messages that have emanated from Labour.”
Michael Brown, senior research strategist at Pepperstone said market attention was already turning to how the new government will act over the coming weeks.
“For market participants…focus will rapidly turn to how the new Labour government act during the first 100 days in office,” he said.
Labour has pitched itself as the pro-business party and the party’s large majority should provide a stable platform on which to deliver its manifesto commitments.
It has promised to put economic growth at the centre of its policy agenda, with reforms to the planning regime expected to be announced in the King’s Speech later this month.
Rob Wood, chief UK economist for Pantheon Macroeconomics, said that a stable policy course should “unlock more business investment and attract greater foreign investment.”
Despite the limited market reaction, a few economists suggested that economic growth might pick up a little faster than expected over the coming years.
Analysts at Goldman Sachs raised their growth forecasts by 0.1 percentage points for 2025 and 2026.
“We continue to expect that Labour’s fiscal policy agenda will provide a modest boost to demand growth in the near-term,” they wrote.
Analysts at Capital Economics also suggested that a Labour government might generate some “upsides” to GDP, inflation and interest rates forecasts.