The Labour Party outlines areas of potential focus for the next UK Parliament.
TAKEAWAYS
- The UK Labour Party won a sizeable parliament majority in the UK general election on July 4, 2024, as it took 411 of the 650 seats in the UK Parliament.
- Key areas of Labour Party policy focused on during and after the election campaign have included energy, the clean energy transition, house-building, planning reform, AI, corporate tax and employee rights.
- The King’s Speech on July 17, 2024, will set out the government’s legislative agenda for the coming parliament.
Following 14 years of Conservative Party rule in the UK, Sir Keir Starmer’s Labour Party has formed His Majesty’s Government with a widely anticipated and substantial election victory at the ballot box on July 4, 2024, marking a seismic shift in the UK’s political terrain. There is now much speculation as to those areas on which Sir Keir Starmer will look to focus, and the earliest concrete signal we will see on his priorities will be the King’s Speech, scheduled for the morning of July 17, 2024, which will set out the government’s legislative agenda for the coming parliament.
Below, is our top-line assessment of a few key policy areas that the Labour Party has highlighted as areas of focus (which their significant parliamentary majority may well allow them to pursue) and how these may impact businesses in and investors into the UK, including points of departure from current UK policy and potential positive developments going forward. While some of Labour’s initiatives may offer investors and businesses reason for cautious optimism, potential obstacles, such as any worse-than-forecast fiscal inheritance, the requirement for international cooperation on certain issues and any worsening in the global economy, could hinder Labour’s ability to implement all of their potential policies.
Energy Transition Investment
Listed as the second of its five “missions” to rebuild the UK, Labour is looking to stimulate investment in the clean energy transition. As part of this “mission,” Labour will seek to establish two new public bodies—the National Wealth Fund and Great British Energy—and fund them (with £7.3 billion and £8.3 billion, respectively) to drive clean energy production and to “catalyse private sector investment … in new and growing industries.” Furthermore, newly appointed Chancellor Rachel Reeves, on July 8, 2024, in her first major speech as the chancellor, committed to ending the ban on on-shore wind projects in England and consulting on reclassifying on-shore wind development decisions as matters for national (rather than local) decision-making, a move anticipated to facilitate wind development decisions.
Britain Building Again
Labour’s manifesto pledged to reform the UK’s planning regime, and much was made of its electoral messaging around support for “builders over blockers” and a pledge to “get Britain building again.” Reeves reiterated this point following the election when she committed to consulting on reforming the national planning policy framework by the end of July 2024 and reintroducing mandatory house-building targets. This, combined with Labour’s commitment to build 1.5 million new homes during the term of the new parliament, may provide substantial investment opportunities for those looking to invest capital in new projects and urban rejuvenation.
Expediting Development of Data Centres
The UK’s current planning regime contains no specific substantive provisions relating to data centres, resulting in an onerous, slow and often difficult-to-understand planning process for data centre development. As part of Labour’s pledge to reform the UK planning regime, it has included a focus on eliminating barriers to the development of new data centres, aiding investors focused on the quick deployment of funds to help scale and support the UK’s tech and AI ambitions. Further signs of optimism for data centre developers also emerged when Reeves announced that the decision to reject two projects in London’s Green Belt would now be reviewed.
Data Protection
Notwithstanding its manifesto being generally silent on wider data protection reform, Labour committed to improving the sharing of data in the context of public services to “better support children and families.” Labour also intends to create a “National Data Library” to bring together existing research programs and help develop data-driven public services. The outgoing Conservative Government sought to revise the UK’s version of the GDPR via the Data Protection and Digital Information Bill, and it remains to be seen whether this new Labour Government will push ahead with those proposals.
AI and Digital Regulation
The Labour manifesto explained that it would look to introduce regulation for the small number of businesses creating the most powerful AI systems. So far, there appear to be no plans to introduce a comprehensive AI legislative framework, like the EU AI Act, in the UK (keeping the sectoral approach to regulation which is currently in place). Labour has also stated that it intends to build on the UK Online Safety Act, which aims to keep individuals safe from online harms, particularly when interacting with social media.
Nationalization Not Really on the Agenda
Contrary to perennial tropes about Labour nationalizing the country, there has been no talk of nationalization of key assets, infrastructure and utilities, save for the proposal to re-nationalize passenger rail franchises, which would undo the reforms of previous prime minister, Sir John Major, from the 1990s, in which private operators took over the running of trains from the state.
VC and Growth Equity Investments from UK Pension Funds
It has long been a focus of concern that the UK’s domestic pensions funds have not been reaping the full benefits that accrue to investors in venture capital and small-cap growth equity. Labour has promised to bring in reforms to increase investment into the UK by British pension funds, including the establishment of a British “Tibi” scheme, copying the French scheme which encourages pension capital to invest in domestic companies. Following the election, Reeves has re-emphasized Labour’s focus on the pension system to drive “investment in home-grown British business and to deliver greater returns to pension savers.”
Capping Corporate Tax
Labour has committed to capping corporation tax at 25% for the term of the new parliament and has pledged to retain existing business friendly regimes relating to expensing, capital allowances and R&D tax credits, in order to afford businesses sufficient predictability to facilitate long-term planning and investment decisions.
Employment Laws
Labour has pledged to deliver the “biggest upgrade to rights at work for a generation,” including potential reforms covering increased day-one rights for employees, banning zero-hour contracts, prohibiting “fire and rehire” practices, extending maternity and paternity leave, introducing “fair pay arrangements” negotiated through sectoral collective bargaining, banning most unpaid internships and requiring that flexible working be the day-one default for all workers (except where not reasonably feasible).
While challenges undoubtedly lie ahead, the Labour Government’s ambitious plans signal a renewed proactive approach to fostering economic growth and innovation; the coming months will reveal how these strategies unfold, offering a clearer picture of the UK’s economic future and the role that investors and business may be able to play in shaping it.
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