The biggest risk? Corbyn, say US bankers

JEREMY Corbyn poses a bigger threat to British business than Brexit, according to a major US investment bank.

In a report for clients, Morgan Stanley warned the election of a hard-Left Labour government would herald ‘the most significant political shift in the UK’ since Margaret Thatcher took power. It said the mass nationalisation of industries, higher business taxes and increased public spending would wreak havoc on the economy.

This would send shares tumbling – hammering the value of savings and pensions for anyone with money tied up in stocks.

Graham Secker, chief European equity strategist at Morgan Stanley, said: ‘We could see the biggest shake-up in the political backdrop since the 70s. This is much more scary from an equity perspective than Brexit.’ The report also said a ‘double whammy’ of Brexit and a Labour government could tip Britain into recession and send the FTSE 100 index down by a third. The intervention underlines growing unease in the business world at the prospect of Mr Corbyn and his Shadow Chancellor John McDonnell taking power. Morgan Stanley told clients there is a ‘high likelihood’ of another election by the end of next year.

The report said: ‘For much of the past 30 years and more, a change of government ultimately had a relatively limited impact on the UK equity market, as policy settings didn’t change too dramatically. However, this may not be the case if we see a Labour government take power under its current leadership, given its very different policy approach.’

Morgan Stanley said retailers in particular would be hit by Labour plans for an increase in the national living wage to £10 an hour, as they operate on low profit margins and have large numbers of staff. Labour has struggled to explain how much its policies would cost and has even admitted it is preparing for a run on the pound if it wins power.