Chairman and Chief Editor
Bedour Ibrahim

Credit rating agencies and Britain's lenders in international bond markets are twitchy about public debt

Investors put UK election winner Labour on credibility watch

Friday 05/July/2024 - 06:56 PM
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The Labour Party's 14-year period in opposition has finally ended with the result of the 2024 General Election، with Keir Starmer starting his term as the new UK Prime Minister. The Labour Party secured a sizeable majority of 400+ seats، which could be a pivotal moment in British politics to end a prolonged period of political and economic instability. Hopefully، it also opens the door to greater climate action. 

A landslide victory

Big investors are warming to Britain after a landslide election win for its new Labour government but remain wary of placing long term bets until Prime Minister Keir Starmer can convince them his economic growth plans are credible.

Sterling، the strongest major currency against the dollar this year، nudged higher on Friday when the scale of Labour's victory became clear. The UK-focused FTSE 250 share index، which has outpaced the more global FTSE 100 year-to-date، rose to its highest since April 2022.
But investors said Labour still needed to revive long-term confidence in UK markets that have struggled since 2016's Brexit vote and the chaos wreaked by Conservative former Prime Minister Liz Truss' 2022 mini-Budget.

Left-leaning Labour has pledged to upgrade Britain's creaking infrastructure and solve a housing shortage while keeping spending tight as the UK's tax burden approaches an all-time high.

But credit rating agencies and Britain's lenders in international bond markets are twitchy about public debt that is expected to exceed 100% of gross domestic product.

"They have to walk a tightrope between economic growth and government debt. We have to see if debt issuance is going to rise، and if the economy can expand at a rate where extra borrowing is deemed acceptable،" said Sheldon MacDonald، chief investment officer at UK asset manager Marlborough.