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Over the past two years, UK public policy analysts have shifted focus from the Conservative Government's policies to those of the opposition Labour Party, reflecting sizeable and sustained poll leads building expectations of the first full-blown transfer in power in the UK for 14 years. Labour desks were set up, contacts dusted off and biographies of the party's leader, Keir Starmer, read. Although Prime Minister Rishi Sunak's early call for a General Election on 22 May caught many by surprise, we have been anticipating and evaluating the implications of Labour policies for our clients for some time.

Kicking off our general election coverage, our public policy team takes a pre-manifesto view on Labour's key policies for business and investment, flagging some of the key issues and risks likely to materialise in what promises to be a significant moment for the G10 economy. On 4 July the nation goes to the polls after a period that has challenged many expectations of the stable policy once strongly associated with the UK. Will Labour bring back predictable law-making? Or will a change in administration unleash instincts that please party activists but frustrate those trying to run businesses and make long-term investments?

Labour's business-friendly shift

Beyond Brexit implications, much of our work around the 2017 and 2019 general elections focused on helping investors protect against below-market-value compensation from Labour's proposed nationalisation programme. This included Royal Mail, energy transmission, distribution and supply, water and the broadband-relevant parts of BT along with the hybrid proposal for businesses with over 250 staff to transfer 10% of their value into 'inclusive employee ownership funds'. Labour also proposed radical policies in areas such as land use, medicines and tax.

By any measure, the picture has changed substantively since the last election. The expulsion of former leader Jeremy Corbyn from the Labour Party on day two of the current election campaign, though not for policy reasons, symbolises a genuine shift in Labour's approach to business and investors. Key policy changes include:

  • dropping all nationalisation plans which involved transferring ownership from the private to public sector. The only remaining proposal is to bring passenger rail franchises back to the public sector upon contract expiry, without the requirement for eventual contract relet. While nationalisation is not current Labour policy, we have published this briefing to assist investors seeking to protect themselves against future changes
  • committed to cap corporation tax at 25% for the next Parliament, retaining the full expensing regime, and maintaining capital allowances, R&D tax credits, and the patent box regime. See Britain decides: Exploring Labour's election tax plans for more analysis on this.
  • emphasising the need for significant private sector investment in the energy transition and other Labour priorities.

Still quite a radical agenda

While many shifts will be welcomed in corporate circles, a Labour government would significantly depart from current UK policies, with key examples including:

  • Tougher regulation
    While nationalisation for the UK utilities sector is off the agenda, a tougher regulatory approach looms. How such aspirations will be implemented remains to be seen; the fact that Labour needs the same investors to deliver on their wider ambitions may give them pause and mediate their plans.
     
  • Partnership with private sector investment
    Labour is committed to attracting global private investment for the energy transition and infrastructure. However, it plans a greater governmental role in directing and co-investing. Initiatives like Great British Energy, a state-backed clean energy company, and a National Wealth Fund exemplify this approach. Labour is also expected to revisit and refresh co-investment models with the private sector.

Why focus on Labour Party policies?

This is not about singling out Labour or dismissing the Conservatives. Here’s why:

  • Rare changes in UK governing parties: Changes in the governing party are infrequent in the UK, with the last three occurring in 2010, 1997, and 1979 (and arguably 2015). It makes sense to focus on such bigger potential changes when on the cards.
  • Current expectations of a Labour victory: Labour has maintained a steady lead of around 20% since Rishi Sunak took office in late 2022. This contrasts sharply with Prime Minister John Major's 1992 situation, where Labour's lead was negligible before his 'shock' victory. Labour’s current lead mirrors Tony Blair’s as the 1997 campaign started (resulting in a 179-seat majority for Labour). Current polls are consistent (though do not predict) with a Labour majority of over 200 seats.
  • Possibility of an upset: While UK election campaigns usually have a limited impact on the overall vote share, the 2017 campaign showed dramatic shifts are possible. Theresa May's Government lost over 8% of its lead, compounded by overestimated polling throughout. A repeat in reverse now would not prevent a Labour majority, but never say never.

 


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On 4 July the nation goes to the polls after a period that challenged many expectations of the stable policy once strongly associated with the UK. Will Labour bring back predictable law-making?

Paul Butcher
Director of Public Policy, Herbert Smith Freehills


  • Employment laws
    Employment law reforms will be a key legislative priority for a Labour government. Their plans include day one employment rights for leave, sick pay and protection against unfair dismissal (subject to as-yet-undetermined ability to use probationary periods). Other key reforms cover banning so-called "exploitative" zero-hours contracts, introducing a new single "worker" status to cover everyone bar those "genuinely self-employed" and reforming longstanding restrictions on trade unions and collectivism. Labour aims to balance business concerns with their pledge to deliver the "biggest upgrade to rights at work for a generation". However, significant questions remain that will greatly affect the impact on businesses.
     
  • Brexit and the future relationship with the EU
    Having been Shadow Brexit Secretary from late 2016 until he became Leader of the Opposition in April 2020, the EU relationship is an area that Starmer both feels strongly about and sees as his own. Yet Labour's previous support for closer ties with the EU, and Starmer's advocacy for avoiding a hard Brexit in the 2019 election that contributed to its defeat, has made the issue problematic for Labour, even as voter support for Brexit has faded. Labour has ruled out re-joining the Single Market, EU Customs Union or free movement of people. However, the party might be willing to countenance steps which the current government would never entertain, including greater voluntary alignment and Court of Justice of the European Union jurisdiction where issues of interpretation of EU law are involved. Areas to be explored include greater recognition of professional qualifications, intra-corporate and youth labour mobility, a deal on sanitary and phytosanitary measures (ie, standards relating to animals, plants and agri-food), and greater cooperation on climate and energy policy. The UK has not linked its emissions trading scheme to that of the EU and therefore will be subject to the EU's carbon border adjustment mechanism, while Switzerland will be exempted because of its linking agreement with the EU.  Also, the UK is in the process of developing its own carbon border adjustment mechanism and cooperation with the EU on this could greatly reduce regulatory burden that it will create. Putting together a coherent package of reforms which overcome EU 'cherry-picking' concerns while offering the UK sufficient benefits for greater 'rule taking' will remain challenging. The earlier election gives Labour a few extra months to work up more detailed proposals while the EU Commission is put in place in the months after the EU's June elections. 
     
  • Planning policy for big infrastructure, the energy transition and housing
    In recent years, reforming the UK's planning system has become a subject of mainstream debate across the political spectrum, aimed at unlocking more affordable housing and fast-tracking cost-effective infrastructure development — crucial for the energy transition.

    Shadow Chancellor Rachel Reeves describes Labour's plans as a "once-in-a-generation set of reforms," emphasising support for "builders over blockers". Successive governments have struggled with this politically fraught issue. It often pits a small, motivated group of voters who oppose local change against national need and the relatively silent majority.

    'Fixing' planning is also deceptively tricky from a policy perspective. Our planning team, experienced in assisting commercial developers and promoters of the most high-profile energy, infrastructure and regeneration projects has created this series to leverage their expertise to critique the ideas for reform being put forward. The goal is to help the next government to implement planning reforms that are neither too radical to execute nor too trivial to drive positive change.  
     
  • Devolving powers in England
    Labour also proposes significant devolution of powers relating to issues such as transport, energy and housing to cities, towns and local authorities.

Beyond the manifestos – The devils and the details

A policy programme in opposition has its limits, not least due to the shift from a small team of advisers to thousands of civil servants. As lawyers know well, moving from general ideas to hard detail reveals the complexities and assumptions previously overlooked. It is when the real decision-making begins.

So, while we can assess policy implications during the campaign, the real challenge begins after the election. Investors and businesses aiming to improve the quality of UK policymaking and delivery will have their best opportunity to secure meaningful changes once a new government is supported by the civil service.

After the election, the first substantive indication we get on priorities will be the King's Speech on 17 July, which sets out the government's legislative agenda. See HSF Explains: What the UK election means for Parliament, government and law-making for more analysis on this.

For more analysis on the general election, please subscribe to our Policy Matters blog.

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Paul Butcher

Director of Public Policy, London

Paul Butcher

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