Corks pop as City of London celebrates Labour's election defeat

Δημοσιεύθηκε: 8 Μαΐου 2015 - 17:12

The City of London, the UK's financial hub, is apolitical for public relations purposes. Viscerally and tribally its sympathies are with the centre-right Conservative party. A surprise electoral majority for the Tories was therefore greeted with jubilation - albeit mostly in private - and a more visible surge in stocks.

"It is a stunning result in every way," said Michael Spencer, chief executive of interdealer broker ICAP, who as a former Conservative party treasurer has no problems with public partisanship.

The benchmark FTSE 100 index jumped 2.3 per cent, reminding market veterans of relief rallies greeting Tory victories under Margaret Thatcher in the 1980s. Somewhere in the City, braying bankers were surely sloshing champagne around, another electoral ritual of that long-dead era.

Liam Frawley, a recruitment consultant more thriftily sipping Peroni at the Sugar Loaf pub near the Bank of England said: "The Conservatives support business, so there'll be more jobs for me to fill and I can go on holiday to the Bahamas." Philip Lammas, an investor in company turnrounds drinking nearby, said the Conservatives could now "finish the job" of reviving the British economy.

Another drinker, admitted he had been hoping for "the chaos" of extended coalition negotiations, which would have created investment opportunities for him. But greater political certainty was welcomed by most in the City and reflected in a shortlived jump in gilt prices.

In government the Tories have bolstered their credentials as the party of business by cutting corporation tax to levels that inspired US politicians to accuse the UK of becoming a tax haven. Meanwhile, there was something for every kind of company in Labour's pledge list - something to upset every one of them, to be clear.

Union-backed leader Ed Miliband had, for example, promised price caps on domestic fuel bills, a higher penal levy on banks and a "mansion tax" on homes worth more than £2m. It is striking how little traction this populism turned out to have with voters. The shares of energy groups, banks and estate agencies rallied derisively even as Mr Miliband announced his resignation.

One of the few stocks to fall belonged to YouGov, a polling company whose predictions of a hung parliament proved inaccurate.

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>Bosses, some of whom backed the Tories in an open letter, now hope for payback from a party on whose donor lists hedge funds are heavily represented. The chief executive of a big outsourcing company was hopeful the Conservatives would "open up" the UK's cherished National Health Service by handing over routine administration to private contractors. "There's a lot of inefficiency. Streamlining has to be a good thing," he said in, words to chill the blood of trades unionists.

Mr Spencer wants the government to "wind back" the bank levy introduced to assuage public anger over the financial crisis. "You can't expect them to lend more when you're taxing their balance sheets," he said, describing the affect on HSBC, which has threatened to quit the UK as "iniquitous".

In a variation on that theme, Scottish financial institutions such as Royal Bank of Scotland could be forced to dust off plans to move headquarters to England. A landslide for the Scottish National party north of the border is expected to create pressure for a second independence referendum.

A greater problem for British business is a referendum on the UK's membership of the European Union, promised by Mr Cameron. Most business leaders believe Brexit would increase costs and reduce access to markets. One FTSE 100 boss said, "I expect chief executives will make a lot more noise about this than they did about last year's Scottish referendum."

One City heavyweight frets at the narrowness of the Conservative majority. "You'd only need an old-fashioned Tory sex scandal or two to take the shine off that," he said, referring to imbroglios that forced some MPs to resign in the past.

However, a decent electoral result for David Cameron should give business folk of little faith some reassurance he can renegotiate EU membership and persuade the British it is worth keeping. Opinion pollsters claim Britons support the UK staying in the union by a margin of 10 percentage points. The City hopes they have got that right, at least.

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