Changing Tides: The Effect of the New Labour Government on UK Industries

The dust has settled on the UK general election, with the focus now turning to the impact of Labour’s landslide victory on the economy and society.

The immediate impact of the election result on financial markets was markedly subdued, a side effect of the widening gap in opinion polls since Liz Truss’ infamous mini-budget in September 2022, which made a large Labour majority almost inevitable. New chancellor Rachel Reeves will hope that this is the beginning of a more “boring” UK, with investors also hoping to put the last few years of economic upheaval behind them.

Such is the size of Labour’s majority the party should have little trouble implementing the policies set out in its manifesto. Let’s dive into what this means for UK businesses and which industries will likely be most affected by the impending changes.

Construction

“Get Britain building again” – Labour’s plans to rebuild the country are underpinned by commitments to boost housing and critical infrastructure construction. Companies with a catalogue of work on public infrastructure and affordable housing developments are well-placed to thrive under the new government, while acquiring expertise in brownfield and green belt developments is the logical step for savvy contractors to keep pace with planning reforms.

Key commitments include reinstating mandatory housing targets to build 1.5 million homes over the next five years, building a new generation of new towns, and prioritising brownfield and low-quality green belt land for development. Green belt developments are required to include at least 50% affordable homes, with new public services and infrastructure also introduced.

Additionally, Labour plans to reform the National Planning Policy Framework to ensure energy projects are prioritised in the planning system, remove planning barriers to new data centres, and unblock stalled housing developments.

Key industries set to be affected:

Residential Building Construction

• Increased demand for construction services to meet commitment to build 1.5 million homes over the next five years.
• Opportunities for contractors specialising in affordable housing, especially in new towns and brownfield sites.
• Potential growth in the need for sustainable building practices and materials to align with planning reforms.

Electricity & Telecommunications Infrastructure Construction

• Boost in infrastructure projects due to prioritisation of energy projects and removal of planning barriers.
• Increased investment in telecommunications infrastructure to support new housing developments and public services.
• Enhanced opportunities in the development of new data centres as planning constraints are eased.

Construction Contractors

• Surge in projects related to both residential and public infrastructure, offering a broader scope of work.
• Necessity for contractors to adapt to new planning regulations and acquire expertise in brownfield and green belt developments.
• Increased competition and potential for growth in the sector as government initiatives drive construction activities.

Technology

Harnessing developments in AI, data, and life sciences to drive innovation and growth across public services and the economy is a recurring theme throughout Labour’s manifesto. Tighter AI regulations placed on big tech companies and enhanced R&D funding models will present opportunities for tech start-ups to disrupt the evolving AI market.

The key commitments include easing planning requirements for data centres, with the new government already recovering planning appeals for two data centres. They will introduce binding regulations for major AI companies, create a National Data Library to consolidate existing research programmes and deliver data-driven public services, and introduce 10-year funding cycles for key R&D institutions in aerospace, AI, automotive, defence, energy, and life sciences sectors.

Key industries set to be affected:

Language Learning Software Developers

• Increased R&D funding and support may lead to more advanced AI-driven language learning tools and platforms.
• Tighter regulations on big tech could level the playing field, allowing smaller developers to compete more effectively.
• The National Data Library could provide valuable data resources for enhancing language learning software capabilities.

Software Publishing

• Binding regulations on major AI companies might foster innovation and diversification within the software publishing industry.
• Enhanced support for R&D could lead to the development of more sophisticated software solutions across various sectors.
• Eased planning requirements for data centres may improve infrastructure, enabling more efficient software development and deployment.

Energy

Labour wants to make Britain a “clean energy superpower,” committing to full decarbonisation of the power system by 2030 and reinstating targets the previous government reneged on. Companies operating in the renewable energy field are the clear beneficiaries of Labour’s aggressive decarbonisation plans. Still, energy companies of all types could reap the rewards by pursuing innovative green technologies to help them secure funding from Great British Energy.

The party's major commitments include creating Great British Energy, a publicly owned company with £8.3 billion in capital to drive investment in clean, home-grown energy production. Labour will establish a framework for energy and climate policies through a new Energy Independence Act, aiming to double onshore wind, triple solar power, and quadruple offshore wind by 2030.

Additionally, they plan to raise windfall taxes on North Sea oil and gas producers, propose a ban on new oil and gas exploration licences, remove obstructive planning policies for onshore wind farms, and roll out a national Warm Homes Plan with £6.6 billion allocated over five years to insulate up to 5 million homes.

Key industries set to be affected:

Crude Petroleum & Natural Gas Extraction

• Increased windfall taxes will place additional financial burdens on North Sea oil and gas producers.
• The proposed ban on new oil and gas exploration licences will limit future opportunities for growth and investment in this sector.

Electricity Production

• Significant investment in renewable energy technologies will shift the focus from traditional electricity production methods to green alternatives.
• Companies in this sector can benefit from funding opportunities provided by Great British Energy to transition to cleaner energy sources.

Wind Power Generation

• Doubling onshore wind capacity and quadrupling offshore wind capacity by 2030 will drive substantial growth and investment in wind power generation.
• Removal of obstructive planning policies for onshore wind farms will facilitate faster development and implementation of new wind energy projects.

Renewable Electricity Generation

• Tripling solar power capacity by 2030 will enhance opportunities for growth in the solar energy sector.
• Overall emphasis on decarbonisation and investment in renewable energy will boost innovation and expansion in various forms of renewable electricity generation.

Transport

Key industries set to be affected:

Road & Motorway Construction

• Increased demand for construction services due to additional funding for road repairs and pothole fixes.
• More contract opportunities as the government accelerates infrastructure projects, including the deferral of the A27 bypass.

Intercity Passenger Rail Transport

• Major organisational changes with the creation of Great British Railways, impacting service management and infrastructure.
• Potential increase in public investment and funding for rail projects, leading to improved rail services and infrastructure.

Alternatively Fuelled Vehicle Manufacturing

• Boost in production and sales due to the reinstatement of the 2030 ban on new petrol and diesel vehicles.
• Increased market opportunities from accelerated rollout of electric vehicle charging points, supporting the growth of EV infrastructure.

Healthcare

The election result brings promising developments for healthcare operators, as Labour aims to rejuvenate the NHS. Operators anticipate increased funding to alleviate budget constraints and reduce wait times significantly. Emphasizing workforce training and collaboration with neighboring healthcare institutions will be crucial in maximizing opportunities under Labour’s healthcare vision.

Labour has promised to deliver an additional £1 billion in funding to facilitate an extra 40,000 NHS appointments weekly, establishing a National Care Service to ensure consistent high-quality social care nationwide, expanding access with 700,000 urgent dental appointments, and hiring 8,500 new mental health professionals to address critical staffing needs.

Key industries set to be affected:

Hospitals

• Increased funding will alleviate budget constraints, enabling hospitals to improve services and reduce wait times.
• Investment in workforce training will enhance the skills and efficiency of hospital staff, leading to better patient outcomes.

General Medical Practices

• Additional funding will allow for more frequent and comprehensive appointments, improving overall patient care.
• Collaboration with neighbouring healthcare institutions will streamline services and reduce administrative burdens on general practitioners.

Dental Practices

• The provision of 700,000 more urgent dental appointments will reduce waiting times and increase access to dental care.
• Recruitment of new dentists in underserved areas will help address regional disparities in dental services.

Other

It goes without saying that businesses all across the economy will be affected by Labour’s plans. Other key areas policy commitments focus on include narrowing the competitive gap between physical and online retail and cracking down on unfair labour practices.

Companies in all industries – from clothing retailers to ride-hailing and delivery businesses – will need to stay on top of any upcoming regulatory changes brought in by the government to make sure they don’t fall afoul of new rules. E-commerce retailers in particular could struggle; they’ll need to find ways to combat the effect of potentially higher business rates if they’re to maintain their competitive edge.

Labour’s commitments also include replacing the business rates system to equitably treat high-street and online retailers, introducing a £500 million fintech innovation fund, and implementing a comprehensive "new deal for working people". This proposal includes banning exploitative zero-hour contracts, ending fire and rehire practices, and granting fundamental rights from day one, encompassing parental leave, sick pay, and protection against unfair dismissal.

Key industries set to be affected:

E-Commerce and Online Auctions

• Potentially higher business rates could reduce profit margins, forcing e-commerce retailers to find new ways to maintain their competitive edge.
• The new business rates system aims to level the playing field between high-street and online retailers, which might result in increased operational costs for online businesses.

Online Ordering & Delivery Platforms

• Companies will need to adapt to new labour regulations, including the ban on zero-hour contracts and enhanced worker rights from day one, which could lead to increased staffing costs.
• Stricter regulations on unfair labour practices will necessitate changes in employment policies and possibly increase compliance costs.

Financial Technology

• The introduction of a £500 million fintech innovation fund could provide significant opportunities for growth and development within the sector.
• Fintech companies will need to stay vigilant about regulatory changes to avoid falling afoul of new rules, potentially affecting operational procedures and compliance strategies.