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Conservative majority forms - what next for savers and investors?

We ask the experts to break down the result.

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.

Next steps for government

Tom McPhail, Head of Policy

The Conservative majority (of around 80 seats) finally brings greater certainty to likely political decision making over the weeks and months to come.

Over the next couple of days we’ll hear announcements on government ministerial appointments and we know they are now likely to recall parliament next week. The new government will set out their legislative agenda – the Queen’s speech. They’ll also be looking to re-introduce the Withdrawal Agreement Bill, which will officially take us into the process of leaving the European Union ahead of 31 January, with a hard stop of the end of 2020.

The chancellor Sajid Javid is expected to deliver a Budget in February, introducing tax cuts and spending plans. Specific pledges made during the election campaign include raising the National Insurance threshold to £9,500, reviewing the tax treatment of low earners in pension schemes, and consulting on a solution to the pension annual allowance taper problem.

Earlier promises to reduce income tax for higher earners and to reduce corporation tax rates have now been shelved. Nevertheless, the new government will be keen to inject a sense of energy, opportunity and enthusiasm into a population, many parts of which are weary of politics in general and of Brexit in particular.

The scale of the Conservative victory means the government has far more scope for political manoeuvre than would otherwise have been the case. On Brexit, Boris Johnson can steer a path with less concern regarding potential disruption from his own back benches. On the domestic front, there is now the possibility to drive through reforms in areas which were out of reach before the election.

Sterling and stock markets

Steve Clayton, HL Fund Manager

Market movements in the weeks ahead will be determined as much as anything by the path of sterling.

When the pound rises, the value of overseas earnings goes down, and the big global traders of the FTSE 100 are likely to fall in the short term.

When the pound falls, the opposite holds true. After the EU referendum the pound dropped sharply, sending the value of overseas earnings and share prices higher.

In the medium term, the Conservatives’ pledge of higher spending is likely to provide a shot in the arm to economic activity, so long as no shocks from abroad materialise. That should support business activity and profitability, which could lead to some improvement in profit expectations, although much will depend on how far and in which direction sterling moves.

While a clear majority in government certainly removes a layer of uncertainty, Brexit of sorts has been widely expected for some time now. We anticipate more noise and volatility in January. Remember the UK still has to negotiate a trade deal with the EU.

Lots of experts think this is likely to be challenging and we’ll either need to push the transition period, or crash out without a deal.

Progress in these negotiations is likely to dictate market sentiment. If early signs look promising, the market could respond positively, helping domestic companies’ share prices, and supporting those that export significant quantities to the EU.

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 policy or political party.

Article image credit: Getty Images - WPA Pool/Pool.

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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