Big Investors Eye UK After Labour's Landslide Win, But Caution Remains

Big investors are cautiously eyeing the UK following a landslide win for Labour, led by Prime Minister Keir Starmer. While the pound strengthened and the FTSE 250 rose, long-term confidence in UK markets remains shaky. Concerns linger due to Brexit's impact, public debt levels, and the aftermath of Liz Truss' 2022 mini-Budget.

Big investors are warming to Britain after a landslide election win for its new Labour government but remain wary of placing long-term bets until Prime Minister Keir Starmer can convince them his economic growth plans are credible. Sterling, the strongest major currency against the dollar this year, nudged higher on Friday when the scale of Labour's victory became clear. The UK-focused FTSE 250 share index, which has outpaced the more global FTSE 100 year-to-date, rose to its highest since April 2022.

Despite the initial optimism, investors indicated that Labour needs to restore long-term confidence in UK markets that have been struggling since the 2016 Brexit vote and the chaos from former Prime Minister Liz Truss' 2022 mini-Budget. Labour has vowed to modernize Britain's infrastructure and address the housing shortage while maintaining tight spending amid a record-high tax burden.

Credit rating agencies and investors in Britain's international bonds remain cautious about public debt projected to exceed 100% of GDP. Sheldon MacDonald, Chief Investment Officer at Marlborough, noted the challenge for Labour in balancing economic growth with government debt, highlighting the importance of debt issuance and economic expansion rates.

(With inputs from agencies.)