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Labour Manifesto – companies and industry

We look at policy proposals and what they might mean for investors.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Jeremy Corbyn has described the Labour Party manifesto as “radical”, and it is certainly wide ranging. Environmental policies are front and centre, but the NHS, Brexit, poverty and public service reforms all feature heavily too.

Any manifesto should be considered as a whole package, but there are some parts of the manifesto that will be of particular interest to investors. We should stress however, that simply because a particular policy is good or bad for a particular industry, or group of shareholders, does not make it good or bad policy. Whether a policy is good or bad is something voters have to weigh up for themselves.

This article should not be viewed as personal advice, should you be unsure of the suitability of a course of action, please seek advice.

Please note we haven’t included the proposals on inclusive ownership funds, as we’ll be covering the topic in more detail over the coming weeks.

Tax and spend

The overall effect of ‘tax and spend’ policies can be hard to judge. On the one hand higher taxes potentially discourage investment. On the other, the recipients of tax pounds will ultimately spend the extra cash, potentially driving economic growth. It’s a delicate balancing act.

However, in the short term at least, a proposed hike in corporation tax will reduce the profits of UK companies. Lower profits reduce the cash available for dividends and reinvestment.

Higher taxes would be particularly damaging for those UK companies that only conduct a small proportion of their business in the UK – think oil & gas, and big consumer goods companies – who wouldn’t benefit from increased consumer activity.


Among the companies that are identified in the manifesto as candidates for public ownership are Royal Mail, energy companies, parts of National Grid, water utilities, rail companies and parts of BT.

The exact terms of these nationalisations isn’t clear. But if we take previous proposals for the water industry as an indication, it could see investors in affected business nursing substantial losses.

A closer look at nationalisation and water utilities

Energy and oil & gas

Putting nationalisations to one side, there are some specific proposals for the oil & gas sector.

These include a windfall tax on oil & gas companies. We don’t yet have much detail on how this would be implemented, but the proposal also includes a provision to protect jobs that depend on the UK offshore oil & gas industry.

This might sound like it will only affect a small minority of investors, but actually could be very wide ranging.

Oil & gas companies account for 16.7% of the UK stock market by market capitalisation, and 13.6% of dividends paid last quarter. That means companies like BP and Shell feature prominently in most equity income and tracker funds.

For investors who want to understand their exposure to this particular policy you can use HL’s portfolio analysis tool to find out what percentage of your underlying portfolio is invested in oil & gas companies.

Minimum Wage

Rises in the minimum wage are a little like the ‘tax and spend’ polices we discussed earlier.

Higher wages increase disposable income and potentially boost spending, but they also put pressure on company profits. Similarly the effects aren’t evenly spread across all companies. Companies that employ a large number of lower skilled workers, especially young workers, will be disproportionately impacted.

We see the proposed increase as a particular challenge for conventional high street retailers. The sector is already competing with online rivals that don’t incur the same staff and property costs.

If wage bills increase substantially then the competitive position of conventional retailers is undermined further still. That’s likely to speed up store closures, with knock on effects for property firms with large investments in retail estates.

Of course retail isn’t the only industry that could be affected, but nor is Labour the only party proposing an increase in the minimum wage.


One of the areas where we think the manifesto is most radical is medicine purchasing. The Labour party is proposing to create a government owned generic drug manufacturer to reduce the cost of drugs and has even suggested it could act to circumvent patent protections where pricing is considered to be unfair.

While the effect of a tougher pricing environment in the UK on pharmaceutical profits might be minimal – the UK is a smaller market and the NHS is already able to negotiate pretty competitive prices on many drugs – the knock on effects elsewhere could be significant.

Labour proposals bare a remarkable resemblance to initiatives being proposed by the more radical candidates in the race for the democratic presidential nomination in the US. The US is a far more important market for pharmaceutical groups, and successful implementation of these policies in the UK could lay a blueprint for action across the pond.

Read more of our general election coverage

All our latest expert comment in one place.

General election 2019

HL is not expressing a view on the merits or otherwise of any of the policies or any of the political parties, and nothing in this note should be taken to be an endorsement or recommendation of any particular party, candidate or policy.

Article image credit: REUTERS / TOBY MELVILLE -

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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