Conservative victory ‘good for business and the economy’

8 May 15

The UK general election result – with the Conservatives winning a majority – could add at least £2bn to the economy this year, according to the Centre for Economic and Business Research.

The economic think-tank claimed that a Tory government would be ‘positive news’ for economic growth in 2015, as fears of a 50% top rate of income tax, mansion tax and greater regulation of the banking, energy and private rented sectors ‘have gone out of the window’.

It also indicated that the pound could jump further against the dollar, while prices at the top end of the London property market should rise sharply over the coming weeks.

‘Expect values to increase by 5% from current level (after falling by a similar amount over the past 12 months) as overseas demand rises in the absence of a prospective mansion tax and higher rates of income tax,’ the CEBR said.

Business investment should also pick up in the second half of 2015, thanks to the decisiveness of the election result in favour of a more pro-enterprise party, it said.

‘All in all the election result should add at least 0.1 percentage points to economic growth this year – a boost to GDP of at least £2bn. But looking ahead the Conservatives will face a number of challenges in the new parliament,’ the think-tank said.

It warned that the country that the promised referendum on European Union membership could mean instability until the end of 2017. Investment by large firms in the UK will be suppressed because of this uncertainty, it predicted.

Rory Bateman, head of UK and European equities at Schroders, agreed that a Conservative-led government would be more business-friendly.

‘UK house builders, impacted by fears of the mansion tax and less home ownership under a Labour government, have also been substantial beneficiaries,’ Bateman said.

‘Elsewhere, UK banks and the tobacco sector – which were mentioned as target areas for extra NHS funding – have rebounded, given the assumption that incremental levies are unlikely.’  

He said in the short term, the election result should provide businesses with a stable political and legislative background in which to invest for the future. 

  • Judith Ugwumadu

    Judith Ugwumadu joined Public Finance International and Public Finance online as a reporter after stints at Financial Adviser, Global Security Finance and The Sunday Express. Currently, she writes about public finance, public services and economics.

    Follow her on @JudithUgwumadu_

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