Can Labour win on June 8th? What will happen if they do…

Written by Jon Rowe 19/5/2017

With only 3 weeks or so to go until this years general election, political parties around the country are releasing their manifestos. The Labour party has so far been the most controversial with political commentators branding it as the most left-wing manifesto since the days of Labour under Michael Foot. The policies proposed by Jeremy Corbyn include scrapping tuition fees, nationalization of England’s nine water companies, an increase in the amount of tax paid by the highest earners, to hire 10,000 new police officers and 3,000 new firefighters as well as putting an end to zero hour contracts.

At a time in which the Labour party is still continuously reminded of their apparent economic failures related to the banking crisis of 2008, it’s a bold move for the party to release a manifesto that arguably puts economic strain back onto the country as a whole. This is only exaggerated by the uncertainty related to the brexit process. Although, in their manifesto, Labour have stated that throughout the brexit negotiations they will place strong emphasis upon retaining the benefits currently gained by being a member of the single market. It is yet to be seen as to whether this will be possible without agreeing to the freedom of movement of EU nationals, which was one of the main policies that ‘brexiteers’ wanted to put to an end.   

Radical policy of hope

The policies outlined by Labour will undoubtedly talk to particular groups of people. The intention of scrapping tuition fees will obviously massively appeal to students in England, who currently pay up to £9,000 a year. Putting an end to zero hour contracts will force employers to change their attitudes in relation to casual workers which is a plus for those who face a particularly challenging job market. Increasing levels of tax for the highest earners in society will be welcomed by those who believe that the rich unfairly get richer while the poor only get poorer. All of which will be music to the ears of those who fear and have already been hit by cuts and austerity measures taken by the Conservative government. In my opinion, Jeremy Corbyn has had to be radical in his manifesto in order to appeal to sections of the electorate the most. He’s had to provide a very distinct difference in policy from the Tory party in order to stand out and really stand any chance of winning in June. If he’s able to market himself as the symbol of hope at a time of uncertainty, he could well be in with a chance of becoming the next Prime Minister.

The main problem for Labour will be in gaining the trust of the electorate. In the media, the Labour party has been made out to look like a total mess. Jeremy Corbyn has been consistently criticised in the media for a number of different reasons, including showing a lack of leadership during the EU referendum, not having the backing of a significant amount of Labour party members, his ties with middle eastern extremist groups as well as his ‘scruffy’ appearance. On top of this, more recently Diane Abbott made the blunder of misquoting the amount of money that it would cost to fund an extra 10,000 police officer, by suggesting that they would cost no more than £300,000. This has damaged the reputation of the Labour party which was already desecrated by the belief that they were to blame for the consequences of the 2008 banking crisis. From my point of view, the media has an agenda against Jeremy Corbyn which has caused this lack of trust from the electorate which is quite ironic when you consider that Theresa May stated that she would not call a snap election, only to do so weeks later. The Labour party have not done themselves any favours but the way in which events have been reported has been consistently negative and deliberately so.

How will the FTSE react?

If there’s anything other than a Conservative win on June 8th, my prediction is that the FTSE will drop significantly, in a similar way in which we saw during the EU referendum last year. Similarly, I believe that the value of the pound will drop too. Financial markets do not react well to uncertainty and I believe that to many financial institutions and investors, Jeremy Corbyn represent that at this current moment. In the instance of a Conservative win, I believe the FTSE will normalise, if not strengthen depending on its movements in the weeks leading up the results.  Should Jeremy Corbyn win and my prediction is correct, in that the value of the pound will weak, I would expect companies that do most of their business outside of the UK to react positively, just as it happened following the EU referendum result. This is because a weaker pound will most likely mean a better exchange rate for those companies. In the long run, I do believe the FTSE would recover in the months following a Jeremy Corbyn win.

Please note that my prediction is my analysis of the mass psychology of the financial markets and how I think they will react in accordance to particular election results. It is not an endorsement of any political party. 


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