With a sustained, significant double-digit poll lead over the incumbent Conservative Party, Labour went into its annual conference in Liverpool with an air of confidence - enhanced by its significant by-election victory in the key SNP-Labour bellwether seat of Rutherglen and Hamilton West last Thursday. With a 20-point swing from the SNP to Labour, it was yet another signpost indicating a pathway to the first potential Labour administration in 13 years.
This did not go unnoticed by the financial services sector, which had an increased presence at this year’s conference.
A heightened presence
Whether it was TheCityUK or UK Finance sponsoring events and panels, Mastercard or Barclays hosting sizeable stalls in the main exhibition hall, or the closed-door roundtables - including one on how keeping the UK’s financial services competitive supports Labour’s five missions - the sector made its presence felt.
In his speech to the party faithful on Tuesday afternoon, Keir Starmer highlighted the essential role financial services will play in driving forward the party’s industrial policy: with investors working alongside Labour’s proposed National Wealth Fund to invest in the country’s critical infrastructure.
The second step of Starmer’s industrial strategy promised long-term stability for investors, as a core part of its approach to business. This contrasted with party conference season last year, when Liz Truss’ ‘mini budget’ brought significant volatility to bond markets and placed strain on liability-driven investment strategies used by many pension funds.
Indeed, one conference fringe panel - ‘Pension saving under a Labour Government’ - outlined some of the competing priorities that face the Department for Work and Pensions should the new Shadow Secretary of State, Liz Kendall, end up in charge of it.
The panel, hosted by Labour in the City, and featuring Muirinn O’Neill, BlackRock’s Vice President, Global Public Policy Group, focused primarily on what should come next following the largely successful implementation of automatic enrolment. It touched on how an incoming Labour Government could seek to improve life-long contributions to pension savings. The panel did however conclude that pension reform is unlikely to be high on the agenda of a new Labour administration, focused in large part on its five national missions.
Securonomics
A clear priority for a potential incoming Labour Government is its ‘Securonomics’ agenda, largely lifted from the US’ ‘Bidenomics’ playbook. This political vision for running the economy entails strategic investment in key sectors, with an industrial strategy focused on advanced manufacturing, tech and the net-zero transition, alongside strong global alliances to shore up supply chains. Shadow Chancellor Rachel Reeves further outlined this vision in her speech, placing ‘security’ at its heart – which she mentioned no less than 18 times.
Investment in economic security would be driven by Labour’s proposed National Wealth Fund, which has a target of ensuring that for every pound of investment contributed by the taxpayer, the state would bring in three times as much in private investment. With the party pledging to deploy £28 billion a year in borrowed investment as part of its Green Prosperity Plan by the second half of the next parliament, the scale of the potential investment opportunity for British and global investors is clear to see.
So, what does this mean for the investment management industry?
Events of the last week are largely congruous with the objectives of the Labour Party over the last three years: to proactively engage business, earn support for its policy agenda and source ideas from the private sector to develop this further, as well as calm fears over what a Labour Government could mean for UK plc.
They also signal fresh investment opportunities that may be created in the event of a Labour Government, off the back of a period when UK assets have been largely out of favour with global investors. At its conference, Labour placed clear emphasis on providing stability for investors and businesses in the UK, on the role of a future Labour Government as a catalyst for renewed activity, and its willingness to finance riskier investments to drive greater private investment.
David Parton, Senior Account Manager, Edelman Smithfield