Cameron’s triumph good news for business
BRITISH businesses, from banks to power companies, are poised to gain from David Cameron’s victory in the UK election, despite fears about his promise to hold an “in-out” vote on British membership of the EU and huge gains for the Scottish National Party.
The FTSE 100 index of leading UK companies jumped more than 2% just after 8am in London on Friday after projections from pollsters that Cameron’s Conservative Party was close to being able to form a government without needing a coalition.
Barclays shares rose more than 5% and Lloyds Banking Group by more than 7% as investors welcomed what is likely to be a more benign tax and regulation regime for the industry than promised by Cameron’s challenger, Ed Miliband.
“People will be surprised at the result,” Simon Walker, director-general of the Institute of Directors, said in an interview with Bloomberg Television.
“Business is pretty resilient, but there’s positive feeling about continuing on the same course, and I think the markets will react well.”
Miliband, as leader of the Labour Party, had promised a series of new measures, including more levies on bank balance sheets, higher taxes on the wealthy and fixed prices in the household energy sector.
Shares in Centrica, a power utility, also rallied by almost 8% in London as investors expressed relief that it would avoid having its household energy bills fixed by a Labour government.
UK gambling companies such as Ladbrokes had also been vulnerable to Labour’s plans to curtail betting terminals in their shops, while estate agents such as Foxtons Group could have suffered from a Miliband “mansion tax” on houses worth more than £2-million (about R37-million).
However, the jubilation among bankers and companies will be tempered by worries about Cameron’s promise to hold a referendum on the EU in 2017, with some companies fearing it will damage trade with Europe and hinder foreign investment in Britain.
“The EU referendum is the event that creates a massive degree of uncertainty,” said Charles Allen, a senior analyst for Bloomberg Intelligence.
The success of the SNP, which made huge gains against Labour, would make companies in Scotland think again about whether they need to shift their headquarters to England, Allen said.
Retail companies are also expected to be winners from a Cameron victory, after Miliband promised to increase the minimum wage and scrap “zero-hour” work contracts.
Michael O’Sullivan, chief investment officer at Credit Suisse Private Banking, said: “What we don’t have is a disruption. If you’re a trader, if you’re going to start pushing the trading buttons, you’re probably going to want to buy some UK midcaps, some of the domestic-oriented stocks, perhaps utilities, and some of the banks that may have suffered from a Labour government-type scenario.”—