What a new Labour government means for investing in the UK

The U.K.’s Labour Party won big in Thursday’s election and is now set to take over from the Conservatives after 14 years, at a time when economic uncertainty is still rife in the country.

Britain’s FTSE 100 index was seen rising 25 points to 8,262 when it opens Friday morning, and the British pound made only light gains. The currency was up just 0.06% and 0.03% against the U.S. dollar and euro at 6:28 a.m. London time, respectively, after little movement on Thursday evening.

Interest rates remain elevated in the U.K. as the central bank has battled high inflation following the Covid-19 slowdown.

The two main political parties ran on different economic and financial manifestos during the election campaign that would likely have different consequences for the investing environment.

The Labour party’s pledge, for example, to increase taxes on the compensation that private equity fund managers received raised a few eyebrows, and led to questions on what this could mean more broadly.

Speaking to CNBC, a selection of experts weigh in on the potential impact the change of government could have on U.K. investment.

The arrival of a new Labour government hasn’t moved markets all that much yet but analysts expect U.K. assets to become more attractive from here on out.

In a note Friday, analysts at Jefferies said, despite concerns raised by a strong showing for the right-wing Reform UK Party, the Labour Party’s U.K. election win would help make the U.K. appear “relatively stable.”

This, in combination with regulatory reform, “could raise the attractiveness of UK assets,” Jefferies’ analysts wrote in a research note.

James McManus, chief investment officer at Nutmeg, meanwhile told CNBC that the vast majority of the time, “markets don’t really care” about elections. “Historical data shows us that elections and their results rarely move markets when the expected outcome is delivered.”

Susannah Streeter, head of money and markets at Hargreaves Lansdown, broadly echoed McManus’ comments in a note published this week, but added that there could be some impact on the economy.

“A widely predicted Labour win in the UK could usher in an era of greater stability for the UK … which should help bolster investor sentiment towards the UK,” she said.

In recent years the U.K.’s political landscape has been characterized by frequent leadership changes, which at times have led to market turmoil — especially during former PM Liz Truss’ brief premiership.

Some sectors — and therefore specific stocks — could also be affected, Streeter pointed out. Pressure could be added to the utilities sector as Labour plans to increase fines for water companies which are already being weighed down by high costs. Meanwhile, the party’s pledge to boost…