It was great to welcome so many clients to our offices in London and to be part of a wide-ranging event that explored how businesses should navigate the changes resulting from the election of the UK’s new Labour government and wider changes during this Election Supercycle.
We were delighted to lead the conversation about Labour’s growth agenda and geopolitical perspectives. This blog shares some key practical takeaways for businesses.
Labour’s election victory has sparked a surge in business confidence, with July seeing the highest confidence levels in eight years. The new government ran on a manifesto of growth, which pervades all their policies – the inherited debt burden means the government must either raise taxes or grow the economy.
Labour’s growth agenda begs a number of questions:
- How will Labour operationalise its manifesto of growth?
- What tensions will we see with its regulatory policy?
- How will all of this be impacted by a new US administration following the US election?
We have summarised our thoughts on these points below. In these early days of the new government, it’ll be important to stay on top of government policies and regulatory changes.
1. The new government is moving fast to promote green investment
Labour has clear plans to support public and private investment in infrastructure, with a particular focus on the energy transition, new technology, and making the UK a ‘destination of choice’ for global investment. The trend was set when, on day one, the Energy Secretary removed the section of the National Planning Policy Framework that had held back new onshore wind projects. While Westminster’s support for green investment had been building steadily over recent parliaments, Labour appears committed to both accelerating the pace and introducing new efficiencies. Indeed, the government is thoughtfully addressing both financial and practical barriers to development and investment. Financial initiatives like the state-backed Great British Energy company and a National Wealth Fund exemplify Labour's approach. From a global investment perspective, we are already seeing significant investments in transport, steel, electric vehicles, and renewable energy infrastructure.
2. Possible regulatory headwinds for UK investment
Certain government policies and regulatory developments could however create a tension with Labour’s growth ambition, and deter investment in particular sectors of the economy. This includes:
- Stronger and more intrusive regulation – particularly in the infrastructure space and in relation to digital markets.
- A rise in regulatory investigations and litigation – with the Labour government particularly focused on consumer rips-offs and cost of living issues, this could encourage a rise in consumer protection enforcement and litigation. Recent legislative developments, such as the Digital Markets, Competition and Consumers Act (see here), also provide regulators with greater discretion and stronger investigatory and enforcement powers.
- Application of the national security regime – national security is not defined in the National Security and Investment Act which provides a degree of flexibility to the Labour government on where it sees national security risks. Labour’s industrial policy has placed a strong focus on national resilience, sovereign capabilities and economic security. This means investments in certain strategic sectors, such as advanced technology and manufacturing, critical infrastructure, clean energy, nuclear and medicines, could be scrutinised more closely. Read more in our blog here.
3. The pending US election is influencing business and will determine future policy
As we close in on the US election in November, both economic policy and national security have become highly politicised. At the issuance of this alert, Vice President Harris and former President Trump were polling in a dead heat. Each administration will bring different types of legal risks for clients.
We can expect a Harris presidency to take a similar approach to the Biden administration on foreign policy. Her administration would likely work closely with UK and EU counterparts on trade and economic policy to counter increasing global economic and national security threats. And while economic policy is currently heavily influenced by the upcoming election, it is likely that will somewhat dissipate once the election is behind us.
A Trump presidency would likely look somewhat different than his first term, as his appointees employ lessons learned. We expect officials in his second term to have a better understanding of the levers of government to effectuate his agenda. A second Trump term may also include a bigger focus on influencing regulation on the global stage. A response to a lesson learned from his first term when the UK and EU led on issues like climate change and digital rights and regulations.
Do not hesitate to speak to your usual Freshfields contact if you have any questions or would like to discuss further any of these issues. See our Election Supercycle page for more content from this event.