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As widely expected, Labour has won the UK election with a large majority. The new prime minister, Keir Starmer, will take office today. Market reaction has been muted but positive and Labour has repeatedly reassured the electorate and markets that taxation policy changes, in particular, will not be major. But while improving economic growth may provide some respite, questions around fiscal policy will remain. Supply-side reforms to the UK government are necessary and possible although fundamental changes to UK/EU relations are unlikely. 

 

Key takeaways:

  • Markets appear to have welcomed the clear Labour victory, hoping that it will result in a period of relative political and policy stability. 
  • Fiscal constraints are likely to remain a concern, despite a modest possible upturn in UK growth. Supply-side reforms are needed to drive major change.
  • Policy stability and cyclical growth will make UK assets worth another look. We outline equity sector preferences. Gilts and GBP look unlikely to spring major surprises. 

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