Conservative win provides executive relief for the City

Guess which company failed to benefit from the stock market's opening relief rally? It was pollster YouGov. A recent survey by the research company had pointed to a hung parliament rather than a Conservative majority.

The FTSE 100 popped 1.6 per cent, acknowledging serious post-election haggling between parties had been avoided. For business, the worst possible coalition would have been the toxic left-of-centre marriage of Labour's Ed Miliband and Nicola Sturgeon of the Scottish National Party.

In the event, the electorate has handed stronger control to the Tories, whose number includes Nadhim Zahawi MP, co-founder of YouGov, who held his Stratford seat.

For most business people a Conservative victory is the best outcome, returning to power a government that has proved its support for larger companies by cutting corporation tax to a historic low. In contrast, Labour proposed a raft of hostile measures, ranging from an energy price freeze to the abolition of zero hours contracts.

The relief rally was a decent one, though hardly on par with the Bolly-popping City celebration that greeted Margaret Thatcher's third consecutive victory in 1987. This time, sterling rallied against the dollar and ten-year gilt yields tightened.

Good results for the Conservatives delivered executive relief most plentifully to companies specialising in expensive homes. Foxtons, whose be-gelled estate agents are the shock troops of gentrification across London, rallied 12 per cent. Berkeley which builds traditional-looking houses, but without the traditional damp and death watch beetles, was up almost 9 per cent.

Mr Miliband, whose defeat in May last year by a bacon roll presaged worse electoral humiliation, will not now get the chance to impose a "mansion tax" on properties worth more than £2m.

Labour had also aspired to cap the profits of private contractors who work for the NHS. The death of that ambition, emblematic of a union-inspired distrust of outsourcers, prompted rallies in the shares of Capita, Babcock and Serco.

The banks jumped too, as the threat of an £800m increase in the banking levy lifted. Lloyds, which Labour had threatened to break up, led the pack. HSBC rose only in line with the market, perhaps because the City expects the Asia-focused bank to quit the UK.

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At the same time, the Conservative victory sets the UK on course for a referendum on EU membership in 2017.

Most business leaders fear a vote in favour of Brexit, which they believe would increase costs and reduce access to markets. "It would add complexity and deter foreign direct investment," one FTSE 100 boss said, "I expect chief executives will make a lot more noise about this than they did about the Scottish referendum."

Foreign banks in the City, such as Credit Suisse and Deutsche Bank, might have to reshore chunks of euro-denominated trading to the continent if Britain votes to leave the EU. They will likely rely on City lobby groups to fight their corner.

However, a decent electoral result for David Cameron should give business folk of little faith some reassurance he can deliver a referendum vote in favour of treaty renegotiation rather than exit. Opinion pollsters claim Britons support the UK staying in the union by a margin of 10 percentage points. Let's hope they have got that right, at least.

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