Labour ‘open for business’ stance faces early test
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By George Hay
LONDON, July 5 (Reuters Breakingviews) -Global capital is set to provide an early test for Britain’s new government. Keir Starmer’s landslide victory in Thursday’s general election means international investors will soon find out whether his Labour Party’s claims to be “open for business” hold water. A series of potential flashpoints may provide some early pointers.
Financiers have reasons to be sanguine about the left-of-centre Labour’s election success. Bankers believe Rachel Reeves, Britain’s likely new finance minister, will be no more hostile to overseas investors than the previous Conservative government. The country’s low savings ratio means the government needs to attract foreign direct investment if it is to meet Starmer’s goal of spurring growth.
Besides, Labour has all the powers it needs to ward off unwanted buyers. The National Security and Investment Act, passed by former Prime Minister Boris Johnson in 2021, earmarks 17 sectors where the government can step in if it dislikes a merger or even a minority investment.
Still, Starmer can expect some headaches. Take Thames Water, the UK’s biggest water utility with regulated assets worth $20 billion, whose holding company recently defaulted on its debt. Given the UK’s strained public finances, the government might welcome a foreign investor prepared to pump in billions of pounds. But while Labour’s shadow business secretary Jonathan Reynolds has said he does not favour nationalising the company, left-leaning lawmakers may demur.
Meanwhile, Mexican billionaire Carlos Slim may want to up his recently acquired stake in $18 billion UK telecom operator BT BT.L, which currently stands at 5%. Daniel Kretinsky is pushing ahead with his $4.6 billion agreed offer for International Distribution Services IDSI.L, which owns the Royal Mail national postal service. The Czech tycoon’s pledges to protect terms and conditions for workers, which Reynolds guardedly welcomed in May, are not as robust as they could have been.
One of the unknowns is which potential allies Labour will embrace. David Lammy, Labour’s likely foreign secretary, has pledged to deal with “the world as it is”, suggesting a readiness to take further investment from Gulf states like the United Arab Emirates and Saudi Arabia. Even so, high-profile acquisitions by, say, Saudi’s $925 billion Public Investment Fund could cause political anxiety. Starmer could woo Chinese electric vehicle manufacturers like the $93 billion BYD 002594.SZ to create jobs and help Labour’s decarbonisation targets. However, that would risk annoying the United States and European Union, which in 2021 collectively accounted for two-thirds of Britain’s stock of inbound FDI.
In July 2016, shortly after the Brexit referendum, new Prime Minister Theresa May waved through a $32 billion takeover of UK chip designer Arm by Japan’s SoftBank. Many British politicians later regretted that decision. Starmer can expect similar tests. Being truly open to business will require Britain’s new prime minister to tread a fine line.
Follow @gfhay on X
CONTEXT NEWS
The Labour Party won a massive majority in the UK’s 650-seat parliament in national elections held on July 4. As of 0930 GMT on July 5, Labour had won 412 seats, with the Conservative Party taking 121 seats and the Liberal Democrats on 71.
The FTSE 250 Index of midcap stocks rose as much as 1.8% in early trading on July 5. The pound was trading at $1.278, up 0.2%.
Graphic: Britain's low savings rate means it relies on overseas capital https://reut.rs/3zwHCJF
Editing by Peter Thal Larsen and Oliver Taslic
Actifs liés
Dernières actualités
Avertissement : Les entités de XM Group proposent à notre plateforme de trading en ligne un service d'exécution uniquement, autorisant une personne à consulter et/ou à utiliser le contenu disponible sur ou via le site internet, qui n'a pas pour but de modifier ou d'élargir cette situation. De tels accès et utilisation sont toujours soumis aux : (i) Conditions générales ; (ii) Avertissements sur les risques et (iii) Avertissement complet. Un tel contenu n'est par conséquent fourni que pour information générale. En particulier, sachez que les contenus de notre plateforme de trading en ligne ne sont ni une sollicitation ni une offre de participation à toute transaction sur les marchés financiers. Le trading sur les marchés financiers implique un niveau significatif de risques pour votre capital.
Tout le matériel publié dans notre Centre de trading en ligne est destiné à des fins de formation / d'information uniquement et ne contient pas – et ne doit pas être considéré comme contenant – des conseils et recommandations en matière de finance, de fiscalité des investissements ou de trading, ou un enregistrement de nos prix de trading ou une offre, une sollicitation, une transaction à propos de tout instrument financier ou bien des promotions financières non sollicitées à votre égard.
Tout contenu tiers, de même que le contenu préparé par XM, tels que les opinions, actualités, études, analyses, prix, autres informations ou liens vers des sites tiers contenus sur ce site internet sont fournis "tels quels", comme commentaires généraux sur le marché et ne constituent pas des conseils en investissement. Dans la mesure où tout contenu est considéré comme de la recherche en investissement, vous devez noter et accepter que le contenu n'a pas été conçu ni préparé conformément aux exigences légales visant à promouvoir l'indépendance de la recherche en investissement et, en tant que tel, il serait considéré comme une communication marketing selon les lois et réglementations applicables. Veuillez vous assurer que vous avez lu et compris notre Avis sur la recherche en investissement non indépendante et notre avertissement sur les risques concernant les informations susdites, qui peuvent consultés ici.
