Change Is Coming Now Labour's At The Helm: What Small Businesses Need To Know

Hi, everyone. My apologies for the late arrival of this newsletter.

There's been a lot going on, and I decided to wait until the gennylec was over and see

where we stand as the new government gets going.

It's early days, but we're getting some indications of what's in the pipeline. There's

plenty of commentary about expected moves from the new Cabinet for me to make

some of my landmark predictions and comments about what the future holds for UK

businesses.

Of course, the result didn't surprise anyone, including the beleaguered Rishi Sunak or

most of the Tory party. The only outstanding questions were about scale and impact.

So now we know: It was a historic result for Labour. The Liberal Democrats, after Ed

Davey's action-packed campaign, are relevant again. Finally, Reform has a few seats in

The Commons, with Nigel Farage set to make his vociferous mark on the lower

chamber for good or ill.

We know there will be changes to the UK's financial landscape, and small business

owners must pay close attention to what this means for them.

Let's break down the key points and how they might impact your business.

Relaxed Markets

Unsurprisingly, the UK's stock markets reacted little to Labour's win. The FTSE 100 and

FTSE 250 indices even went up slightly. This calm reaction suggests that the markets

priced in a Labour win some time ago, so it's all nice and relaxed with no panic. I bet

ex-MPs Truss and Kwarteng are looking on enviously.

It'll be worth monitoring areas such as Infrastructure and Defence in the future.

Labour's plans to invest in green projects and increase defence spending should

benefit these sectors. The energy sector may be subject to turbulence as Labour's

policies on taxes for energy companies and the rollout of GB Energy takes shape. It'll

be worth monitoring the nationalised water and transport industries, too.

Overall, though, the commentariat thinks the UK market is undervalued, meaning there

might be good opportunities for long-term investments. If the new government can

boost confidence, this will enable growth for businesses of all sizes.

Property & Housing

If Labour's plans work, we'll have 1.5 million new homes built in this parliament at a

rate of 300,000 new homes per year. The NIMBY lobby's voice will be loud but

disregarded. This policy will see significant changes to the planning system and

strategies to manage skills shortages in construction.

Even now, the housing market shows increased activity and rising prices. Despite

expected interest rate hikes, mortgage rates are slightly below recent peaks, and

mortgage approvals are up. This suggests the housing market might stay strong, but

affordability remains a concern for many homebuyers, especially first-timers.

Sterling & The Foreign Exchange Market

Sterling has remained stable in the face of Labour's win. Analysts say this is because

the markets expected the outcome. However, experts predict the pound might weaken

against the Euro over the next two years if interest rates tick down as the Bank of

England declares victory in its struggle with inflation.

Bond Markets & Gilts

Few expect Labour's win to impact the UK's bond markets significantly. Historically,

government bond yields (interest rates) don't change much when a new government

comes in. However, businesses are looking to the government for direction, particularly

regarding the impact of technology and artificial intelligence (AI).

Investing In AI

Tony Blair has chipped in on the need for tech investment, particularly AI, to enhance

public services and improve citizens' lives. He thinks AI can create £12 billion of annual

fiscal space by the end of the first Labour term and £40 billion by (an assumed) second.

That's a valuable chunk of public service-friendly pocket change. And streamlining

services in healthcare, education, and government infrastructure efficiencies will hugely

benefit businesses.

Of course, there will be downsides, as jobs are lost to technology and data

management and privacy risks increase. As we know, public bodies need a better

record in this area. The government will need strong regulation and mitigation

strategies to manage these futuristic changes.

Stability & Investor Confidence

Labour's win has brought a sense of stability to the markets (so far). The FTSE 100

index went up, and the pound has strengthened. Keir Starmer's leadership will bring a

calmer and more moderate political climate, avoiding the fiscal turmoil that affected

bond markets in 2022.

With Labour’s securing a decisive majority, investors can feel more confident about the

future. This stability is desirable, particularly when other countries are experiencing

political upheaval, so enhanced inward investment could come soon. That is an

excellent prospect, so thanks, France!

What This Means For Small Businesses

Labour's victory heralds a more predictable political environment, a welcome change

for small businesses. After years of political uncertainty, this result should provide the

stability businesses need to plan and grow. With an emphasis on smoothing

relationships across the board and, crucially, with the EU, there's a good chance doing

business, especially in exports, will get easier. This optimistic outlook is a much-needed

ray of hope, but expect Brexit purists to scream the house down over even small EU

concessions.

Labour has promised not to raise taxes on 'working people'; while this should help

maintain and promote economic stability, it's a promise that leaves many doors open.

Are businesses and business owners included? What about those who live on interest

or dividends? Pensioners? Inheritors? The uber-rich?

Many of these people will be sceptical that their taxes will remain stable. Time will tell.

The new government's focus on infrastructure, international markets, housing, and tech

investments could create abundant new opportunities for small businesses. By

improving efficiency through process improvement and investing in AI, companies can

become more competitive and innovative. This potential for growth and commercial

progress is inspiring, and if things go well, the future could indeed look a whole lot

brighter.

Despite these positive signs, the new government faces challenges. The international

scene remains febrile. There is the prospect of the US elections in November and the

orange-tinged implications the result could bring to our shores.

The UK economy is still fragile. Debt is eye-wateringly high, and while inflation has

fallen, service prices remain high. Growth is sluggish, but interest rate cuts by the Bank

of England and cheaper borrowing will help businesses make confident investment

decisions that will promote growth for UK plc.

So, What Are My Conclusions?

There is nothing concrete as yet, but Labour's victory at this very early stage brings a

new era of political stability and pragmatic, less ideological decision-making. Business

owners should thrive in this new environment by focusing on growth, leveraging

technology, and navigating the economic landscape wisely.

So, let’s see, shall we?

Bring It Home, Boys!

I'll no doubt return to politics as things pan out but let's turn to some results that have

been less predictable.

I'm talking about the England team's lumpy progress to the Euro finals in Germany. You

know I adore my football and would have loved to have been there to cheer on

England.

But has there been enough to cheer about? It didn’t seem like it. When we watched

their journey to yet another final in a major tournament, it was as smooth as riding

every roller coaster at Chessington World of Adventure.

Each game has been a mixture of stomach-churning lows with barren patches of

lacklustre goal-less action punctuated by dodgy, puzzling substitutions. When all

seemed lost, we got exhilarating highs and unlikely wins from last-minute goals and

buttock-clenching penalty shootouts.

And then, in the semis, we saw off the Netherlands to get into the finals, bish, bash,

bosh. It was like a different team had been shipped in. While they weren’t totally

dominant, a superb 90-minute goal from Ollie Watkins means England will face Spain

in the Berlin final on 14 July.

Just as Keir Starmer has been described as a lucky general in UK politics, Gareth

Southgate might be the same for international footie. Both will say that a win's a win,

and precisely how victory comes when the final whistle’s blown is utterly irrelevant.

All we need now is an England Euros victory as the icing on the cake for a

reinvigorated nation.

Have faith, we deserve it. Come on, England!

OK, that's it for this month.

All the best

Adam