Key Takeaways:
Labour won a substantial majority with 412 seats despite securing only 33.8% of the national vote, reflecting limited broad national popularity.
Labour aims to boost investor confidence with a pro-business approach, maintaining strict fiscal rules and avoiding major tax increases, limiting public expenditure growth.
Labour plans to nationalise passenger rail services and establish GB Energy, focusing on significant infrastructure and clean energy investments.
KSG assesses that these plans are unlikely to affect national and international companies operating in the UK much differently to the previous Conservative Administration.
The Result
As was widely anticipated, Sir Keir Starmer's centre-left Labour Party won a substantial majority in the 2024 UK General Elections, winning 412 seats. Meanwhile, the incumbent Conservative Party suffered the worst defeat in the party's history after being relegated to just 121 seats. The election was generally positive for smaller parties. The Liberal Democrats broke their modern-era record, winning 71 seats, while Reform UK and the Greens won a record 5 and 4 seats, respectively.
It is important to note that while Labour now enjoys a significant majority in the House of Commons and can thus pursue its legislative agenda virtually unimpeded, Labour's majority does not reflect the party's national popularity.
Firstly, national turnout is estimated to have been around 60%, marginally higher than the record low of 59.4% in 2001. Secondly, Labour won only 33.8% of the national vote share – the lowest-ever winning share and fewer votes than the party achieved in 2017 and 2019. Meanwhile, despite winning only 5 seats, Reform secured 14.3% of the national vote; this reflects the disillusionment of many traditionally Conservative voters, who feel that the party did not deliver a suitably hard-line approach on issues such as immigration. Therefore, these voters shifted to Nigel Farage's Reform UK party, which collapsed the Conservative's electoral majority.
Labour's Agenda
Starmer's Labour Party campaigned on an avowedly pro-business platform, seeking to rebuild investor confidence in the UK by promising stability and focusing on growth-led economic development.
The party has committed to stringent fiscal rules and has pledged not to raise income tax, national insurance, or VAT while capping corporation tax; this leaves the newly formed government with a relatively limited scope for increasing public expenditure. However, by fostering (faster) economic growth through stable government and attracting private investment, the government hopes to deliver on key manifesto pledges.
Notably, the Labour government plans to deliver significant infrastructure projects. For example, the government intends to nationalise passenger rail services once existing private sector contracts expire. They also plan to establish GB Energy, a publicly-owned clean energy company, which will likely act as a co-investor with the private sector in the energy projects, along with a new National Wealth Fund to invest in energy and infrastructure projects.
Looking Forward
KSG assesses that rising support for Reform UK will likely push the Conservative Party to adopt a more hard-line stance on immigration and cultural issues while continuing to advocate for lower taxation – in effect, moving the party further to the right in the short-medium term.
Pairing this dynamic with the Labour Party's limited popularity and the challenging economic conditions (following the Coronavirus Pandemic and Energy Crisis) that Starmer's government is inheriting, it is highly likely that (despite Labour's significant majority) public sentiment will quickly shift against Labour if the government fails to deliver on its pledges or maintain its avowed fiscal discipline.
Labour’s plans for the economy, domestic business environment, and foreign direct investment remain surface level (at least publicly), while clarity will likely come over the next 2-4 months. KSG assesses that these plans are unlikely to affect national and international companies operating in the UK much differently to the previous Conservative Administration.
By Alexei Hoey, Chief Analyst