The Labour party took over the UK government last week, and it could open the door to more international investors to boost the economy.
The new prime minister, Sir Keir Starmer, will make foreign direct investment a top priority for the UK government in order to meet the country’s new growth goals.
Confidence is high among bankers at the moment that the new Chancellor, Rachel Reeves, will welcome overseas investment at least as much as the Conservatives did, while the party claims that it is “open for business” to international investors to drive the economy forwards.
At the helm of international affairs for the UK government is David Lammy, the new foreign secretary, and one of the politician’s first actions was to make a whirlwind tour of Germany, Poland and Sweden in a bid to begin to “reset Britain’s relations with Europe“.
Labour’s landslide victory last week caused an instant boost to the pound, which has lifted against the US dollar and the euro and held its gain over the weekend. According to City investors, the new UK government could provide a sense of stability for Britain in the global markets, boosting investment.
New UK government creates “safe haven”
Ahead of the election result last week, Nuwan Goonetilleke, the head of shareholder assets at Phoenix Group, said money was already pouring into London-listed assets in anticipation of a Labour victory.
“The UK is really being seen not just as a safe haven, but the safest of havens – especially in Europe,” he said.
“Given the previous gyrations seen in the markets, whether that’s Liz Truss or the leftwing policies from Jeremy Corbyn’s Labour in 2019, we’re not really seeing any of those wild swings now. That tells you how far the UK has come from Brexit when there were huge unknowns priced-in for the UK.
“With a Labour majority, it continues to really double down on that promise of economic stability, growth and wealth creation.”
Many argue that the Labour party now at the head of the UK government has advocated for a more business-friendly approach than previous Labour party leaders had done, and this is a sign to international investors as well as local private investors that things are set to open up.
Political turbulence in other countries – with obvious nods to the snap French elections and the presidential race in the US – is likely to be used as a point of leverage by the UK government to make a case for Britain as the most stable country for investors at the moment.
More investment in UK housing
The new UK government is setting out much clearer targets for the UK housing sector, including reinstating minimum housebuilding levels at 1.5 million new homes over the next five years.
It is also pledging to reform and overhaul the planning system, including prioritising development on brownfield land as well as unlocking parts of the protected green belt that are poor quality or disused, which Labour refers to as green belt land.
This new promise on the construction of new homes, it is hoped, could cause a surge of activity in the sector, boosting investment opportunities from both the UK and abroad.
However, it is worth noting that Labour suggested last year that it would introduce a higher rate of stamp duty for overseas property investors buying UK housing (whether that is to live in or as an investment property).
At the moment, international buyers must pay a 2% stamp duty surcharge on any property purchases in the UK. It remains to be seen if or when a new, higher rate will be introduced, though, so we could expect to see a flurry of overseas buyers getting their purchases made while stamp duty remains at its current rate.
If you’re an international investor interested in investing in the thriving UK property market, get in touch with BuyAssociation today, or explore some of our current opportunities here.
