Industry reacts to General Election result

Boris Johnson has promised to work flat out and that his party will deliver Brexit after the Conservatives won the General Election with a comfortable majority last night.

The Prime Minister met with the Queen today and asked to form a new government, after his party crushed Jeremy Corbyn’s Labour on a remarkable night in UK politics.

With all seats declared, the Conservatives have won 365 seats to sit on a House of Commons majority of 80.

MoneyAge has rounded up some initial reaction to the historic win and what the new Conservative government might mean across the UK economy.

Investments

Sanlam UK chief investment officer, Phil Smeaton, said: “Investors in the UK can relax as their taxes remain unchanged, and global investors are likely to feel comfortable enough to commit capital to one of the world’s cheaper equity markets.

“The 2% surge in the pound brings it closer to fair value on a purchasing power parity basis, and we can expect the flight to safety in government bonds unwind slightly. Inflation expectations may tick higher as Boris implements his fiscal spending plans, which would be another reason for economic growth to accelerate.”

JLM Mortgage Services director, Rory Joseph, added: “Regardless of your own feelings about the UK leaving the EU, we live in a democracy and the will of the people has to be sanctioned.

“Our economy has stalled due to a lack of decision and direction, and therefore the Election should hopefully allow businesses to make the investment they need to, plus allow the public to move forward with their plans. It is positive that we now have a resolution.”

Property market

“This decisive General Election result could deliver a massive adrenaline shot into the UK property market,” commented managing director of the mortgage broker Coreco, Andrew Montlake.

“Expect a sharp uplift in transaction levels starting early in 2020, as buyers and sellers who have played it safe put their plans into motion. Spring for the property market could come early after this comprehensive election victory.

“There is a huge amount of pent-up demand out there that looks set to be unleashed on the market next year. The fact that borrowing costs are ultra-low gives people even more reason to buy and sell. With so much red turning blue, the property market could be at the beginning of a long Brexit bull run.”

Zoopla research director, Richard Donnell, however, suggested that housing fundamentals would remain unchanged.

“The challenges for housing vary across the country and there are no simple, national solutions,” he said. “Record low mortgage rates have boosted house prices, while affordability challenges remain across southern England.

“At the same time, housing has become less liquid with the average homeowner moving once every 19 years. This is a result of long run economic factors and demographic changes compounded by stamp duty, which is a major barrier to movement, especially in southern England.

“Housing policy needs to cater to the different challenges across the country and focus on barriers to movement and increasing choice across all tenures.”

Stocks

AJ Bell investment director, Russ Mould, commented: “The Conservative majority win at the General Election has driven a rally in the pound and UK domestic stocks. The currency jumped 2.7% compared to last night on confirmation that Johnson’s party had been victorious, and that this outcome removes several key risks that have been hanging over the UK stock market.

“It removes the threat of Labour trying to renationalise many sectors, explaining why shares in Royal Mail jumped 8% to 250.4p, transport companies rallied – Go-Ahead up 7% to 135p and Stagecoach up 14% to 150.5p – and utility stocks were back in fashion, including Centrica up 14% to 92.04p.

“The market is now digesting the prospect of a stronger UK economy as a result of the Conservative victory which explains why shares in banks, housebuilders, leisure companies and retailers jumped following the General Election news.”

Pensions

Hargreaves Lansdown head of policy, Tom McPhail, explained the result could create a couple of consequences in the pensions sphere.

He commented: “Undoubtedly we will see the reintroduction of Guy Opperman’s oven-ready Pension Bill which ran out of time at the end of the last parliament. This Bill will strengthen protections for occupational scheme members, pave the way for pensions dashboards to be developed and open up the option of a new type of shared-risk pension scheme.

“In addition, we expect to see pension tax reform back in the table. This is for a couple of reasons. Firstly, the Conservatives have already acknowledged the problems with the Annual Allowance Taper and its impact on higher earners such as doctors; they had also acknowledged the problem of lower earners missing out on tax relief because of the way their employer operates their scheme.

“They have to fix these problems. Tinkering will only make the pensions system more dysfunctional than it already is; the best answer would be a fundamental reform of the tax treatment of pensions across the board.

“The pressure is on the Chancellor to be positive and ambitious; the spending taps will be turned on and we expect a big Budget in February.”

Brexit

Hope Capital managing director, Gary Bailey, said: “With this emphatic victory for the Conservatives, it proves that the people of the UK want a swift end to Brexit, to move forward.

“Focus, that has been held back for the past three years, must return to business and the economy. The aim must be an orderly Brexit, finding the right resolution to restore consumer, investor and business confidence.

Just Mortgages national operations director, John Phillips, added that the political deadlock of the last few years had finally been broken.

“Whatever anybody may think of the result, we now have some clarity around Brexit at long last and that should help bring more certainty to people thinking about buying or selling homes, and to investors,” he said.

Foundation Home Loans director of marketing, Jeff Knight, added: “It is clear people have voted to get Brexit done and move on. People were clearly fed up with the uncertainty and wanted to live their lives and start planning ahead.

“The large majority secured by the Conservative Party should bring stability for at least the short-term at least, and it will be interesting to see how long the new political map lasts once Brexit is done and settled.

“The mandate secured by Johnson could also mean a ‘softer Brexit’ which should provide a far better outcome for the country than to leave the EU with no deal.”

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