Labour election rhetoric stirs up investors’ fears
Miliband’s conference threats undermine shares
ED MILIBAND’S halfhearted attempts to persuade business that he is not antienterprise fell flat at the Labour Party conference in Manchester this week.
The Leader of the Opposition, who could be prime minister in eight months’ time, insists that he wants to ‘work with business’ to create a fairer and stronger economy in Britain.
Labour says it is pro-business, but not business as usual.
But the promise of more regulation and higher taxes – on houses, earnings and profits – and Miliband’s failure to mention the deficit, left nerves j angling i n boardrooms across the country. And it is not just executives, fat cat or otherwise, who should be nervous.
Labour has whole sectors of British industry in its sights – with potentially serious implications for the stock market and the values of the investments and pension pots of millions of families.
Miliband added big tobacco to his hit list this week, sending shares in British American Tobacco and Imperial Tobacco tumbling with the promise of yet more tax.
The industry is now in the firing line along with Miliband’s other targets. Banks face being broken up, housebuilders could see their land confiscated, energy suppliers are braced for price freezes, and outsourcing firms will only win government contracts if they jump through certain hoops.
Analysts warn that this assault on so much of UK plc does not bode well for the economy or investors – including millions of ordinary workers saving for a pension.
‘ Essentially he has t aken a staunchly anti-business approach,’ says George Godber, a fund manager at Miton Group.
‘Such a co-ordinated negative attack across such a wide range of sectors is extraordinary, which is why the fallout will be so brutal. Savers will have a very difficult time.
‘It will be a real mess. It will be gritty.’
Miliband, perhaps rightly, is gambling that an attack on big tobacco, banks, energy suppliers and so on will play well with voters. But others are worried about the message it sends about the UK as a place to do business.
Some Labour MPs are nervous. Rochdale MP Simon Danczuk warned that it was ‘easy politics to focus on smokers’.
He added: ‘ In these difficult times, hitting smokers yet again ... is not the way for the Labour Party to go.’
The industry, unsurprisingly, went even further after Miliband unveiled his plan to raise at least £150m in extra tax to help pay for the NHS.
I mperial Tobacco, whose brands include Golden Virginia and Lambert and Butler, branded the policy ‘ totally unwarranted and unjust’ and amounted to an attack on a legitimate business sector.
Industry figures say the sector already pays £12.3bn a year in tax, 86pc of the cost of a packet of cigarettes is tax, and extra levies will push up prices.
David Hayes, an analyst at Nomura, explains: ‘The obvious solution for companies is likely to be a pass- on of the cost through higher prices, so you would expect the consumer to bear the costs.’ Shares in Imperial Tobacco and British Ameri can Tobacco fell more than 2pc on the day of Miliband’s announcement.
Energy companies have fared worse. Since Miliband told last year’s party conference he would freeze household gas and electricity bills for 20 months if he wins the 2015 election, shares in British Gas owner Centrica have lost around a quarter of their value.
AND house builders are furious that they have been accused of hoarding land – pointing out that work is under way on 96pc of the plots that builders own and are able to build on.
‘ Housebuilders completely reject the accusation that they hoard land that is capable of providing new homes,’ says a spokesman f or the Home Builders Federation.
‘The country faces a housing crisis that will take a collective effort to solve. It is unhelpful when political rhetoric centres on myths when the real challenge is how we increase housing supply.’
Garry White, an analyst at stock broker Charles Stanley, accused Miliband of proposing ‘populist’ policies ‘that will please only the Left wing of his party’.
He said: ‘The outcome of the next election could have a major impact on some of the UK’s largest businesses – and therefore on your investments.
‘ Ed Miliband has already revealed he will target certain sectors, even before the election campaign has officially begun.’
Plans to raise corporation tax, impose a mansion tax on houses worth over £2m, reinstate the 50p rate of income tax and hike the minimum wage to £8 an hour have also set alarm bells ringing.
CBI director general John Cridland accused Miliband of lacking an ‘economic narrative’ following his speech, and says business is increasingly wary of ‘political risk’ between now and polling day.
Investors and savers should also take note.