The shocks of a potential Corbyn-led government would be less than a hard Brexit might cause to the UK, experts have argued.
The general election of 2017 saw prime minister Theresa May’s Conservative party losing its majority at the Commons, while the opposition, led by Labour’s leader Jeremy Corbyn, defied predictions gaining seats in the house and a 40 per cent share of the vote.
With the next UK general election due in 2022, when the UK will have been outside the EU for three years already, commentators have argued a potential Corbyn government won’t create much noise, as opposed to what a hard Brexit would do.
Speaking on a Money Marketing panel today, Aspect 8 chartered financial planner Claire Walsh said Brexit will bring far greater uncertainties than a Corbyn government to markets and doesn’t see his leadership and suggested nationalisation measures as a “big risk” for the country.
On the Corbyn effect on investing, the panel had mixed views, however.
Efficient Portfolio managing director Charlie Reading said a Labour government could be negative for equity investors in the long term, while Walsh said some sectors could benefit from it, like infrastructure, utilities, and housebuilders.
Walsh said: “None of the market shocks came from little political changes [in recent times]. We shouldn’t speculate on that.”
On the other hand, Royal London director of policy Steve Webb, also speaking on the panel, expects interest rates to raise if Labour succeeds at the next election.
He said: “Rates will go up if the government starts borrowing. And that is a mixed blessing…defined benefit deficits might come down too.”
Reading said Corbyn might cause worries about sterling, which in return could create a potential problem for overseas investment, but Lothbury Pendil Financial Services chartered financial planner Nathan Harris said a weaker sterling could instead attract money from overseas.
On the overall impacts on the financial services sector, Webb also predicts that a potential introduction of the transaction tax in financial markets, the so-called Robin Hood tax, is likely to filter through to pension investments as well.
He said: “The Robin hood tax could work [in the UK], but which shares are going to be traded? This could happen, but it is more likely to happen outside the EU. However, it is very likely we might have a transaction tax on pensions.”
As for other tax reliefs, such as those on enterprise investment schemes, Reading said these tax reliefs could also be cut by a Corbyn government.
He said: “EIS and SEIS are very valuable because they create a more entrepreneurial environment but possibly they will be seen as [a benefit] only for the rich.”.