Introduction
Acquisition under Labour – what are the key effects on the market as a result of the general election? In order to effectively discuss this topic, Alex Canham, Partner of M&A Law Firm Herrington Carmichael posed this question to Gary Venner, CEO of IFA Acquisitions, to give his thoughts.
How did the market react?
Gary: “The morning after, is a good barometer of how the market is going to react and the shares rose a bit so, that was all good signs that this has not spooked the market. In fact, the pound barely moved at all and if we look at the demand for UK bonds, they rose as well. Although it was a dramatic night for politics and seeing what a change there had been, the markets are in a really good stable position, and I think there’s three reasons for that.”
The three key reasons why?
Gary goes on to list his three key reasons why the markets have stayed in a stable position.
- “First of all, the Labour victory was known for months. This was not something that had come as a surprise. The financial markets price in what they’re expecting so when it actually happens, it’s already been priced in. I think the markets were more jittery about the French situation [Le Pen challenging Macron] and wondering what was going to happen there than they were about the UK position.”
- “Secondly, when we look at the rise in the FTSE 100 and FTSE 250, the British companies have shown a good increase in the index and that’s probably priced in because Rachel Reeves has made that very quick early doors announcement that we’re going to have more homes built. That affects house builders and all of the related industry supply chain as well. We wonder what’s going to happen with the spend later on, but Rachel Reeves has been going out there and saying that the market can expect a safe pair of hands. That’s what the stock market has basically factored in at the moment and until that changes, that’s where the sentiment is.”
Rachel Reeves has since declared on the 29th of July 2024 that she will hold a budget on the 30th of October 2024.
- I think the third key reason is because the economy is probably at its best at the moment that we’ve seen for a while. Inflation is finally down to the target of 2% which is absolutely fantastic, and we are seeing growth slowly pick up. Interest rates have been crazy high compared to how low they were before. From 0.1% going up to 5.25% has been a big increase and that was caused by a number of things such as the global pandemic, and then we had the energy crisis, and particularly because of Russia’s invasion of Ukraine. So, all of those price rises had to be factored in using interest rate policy to control inflation and now the market is starting to get better. Energy prices are coming down. If the election hadn’t been called, possibly we would have started to see rates reducing now and I think we certainly can see that they will reduce over the next couple of months, so that’s going to be an improvement to the economy. It will help the new government as well because there’s a massive public sector borrowing and the cost of servicing that interest on that government borrowing will reduce as well.”
The markets are good, but nothing is ever certain. We still have the American election to go through, now Harris versus Trump since Joe Biden’s withdrawal from the 2024 Presidential Election race. We hope to continue to see a nice stable market and with the extra spending that’s obviously going to be starting to happen from now, it should actually see some growth. All positive signs!
Watch More!
This blog post in an excerpt from our second Acquisitions Q & A series where Gary Venner, CEO of IFA Acquisitions, and Alex Canham, Partner at Herrington Carmichael, share their top tips, discuss market updates, and give their insights into the legal processes involved when buying or selling an IFA business. Head over to the IFA Acquisitions channel to learn more about Acquisition under Labour!
Conclusion
Post-election, the markets seem to be holding stable under a Labour government. Change is always possible, but this is certainly promising for what’s to come!
This adapted excerpt comes from our second Acquisition Q & A series on the IFA Acquisitions YouTube channel. Don’t miss out! Head over to our channel to watch the series and gain key information to support you in your acquisition journey.
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