Key economic challenges facing Labor and the woman who will soon become Britain’s first female chancellor | Business News

Having turned the political map red, the Labor Party’s priority is to drive the economy into the red.

Sir Keir Starmer program for the government may be modest, but the means to execute it are not.

A new prime minister and, in Raquel Reeves – who is expected to become the UK’s first female chancellor – has a difficult economic heritage.

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Stagnant growth, high debt interest payments and an aging and sick population have left public services overwhelmed.

If they want to revive them without breaking campaign promises not to increase debt or raise taxes, everything depends on generating growth.

The first indications from financial markets it was positive.

Almost two years later Liz Truss mini-budget sent the pound crashing and the cost of borrowing soaring, there was no similar drama to greet Sir Keir.

Both sterling and 10-year gilts remained stable and the FTSE 100 index rose, driven by builders and lenders, a recognition of the Labor Party’s plans to promote house building.

The FTSE 250, made up of more British companies, also rose more than 1% in the first hour, perhaps a vote of confidence that Labor’s promise of stability, quality valued above all, will be fulfilled.

Sir Keir and Reeves promise to stimulate growth, but it will take the private sector, and the investors on whom the UK relies, to deliver.

The effectiveness of these plans and how new ministers deal with a challenge and the inevitable unknowns will shape the administration.

At the top of the list is reform planning, aimed at accelerating housing and energy infrastructure, rewriting rules and reclassifying the green belt to deliver homes in the face of inevitable local opposition.

Barriers to onshore wind power, moribund for a decade under the Conservatives, and solar power, attractive to farmers but not their neighbors, will be removed and the national grid will be expanded and improved.

This should be good news for companies like Octopus, Britain’s biggest retail energy supplier, with ambitions to become a major generator if renewable projects become easier to implement.

Founder and chief executive Greg Jackson welcomed the Labor Party’s commitment to the sector, which contrasted with Rishi Sunak recent net-zero skepticism.

“I hope what we have now is the stability that we can invest in providing a cheaper green electricity system,” he told Sky News.

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Mr. Jackson has specific demands.

He wants simplified planning – projects can currently take 13 years to be connected to the grid – a reform of the market so that local people benefit from local renewable energy and a boost to electrification.

Labor will bring forward the phase-out of new petrol and diesel cars to 2030, reversing Mr Sunak’s delay until 2035.

“The big message for me is that voters have rejected going back to the world of fossil fuels, oil and gas. Every poll tells us that voters know that wind and solar are the cheapest, safest and most reliable sources of electricity we need,” he said.

“Britain can really be a proud leader in this transition and that will be great for jobs.

“The countries that lead this way will be the ones that are most prosperous and I really hope that is where we will be now.”

While the oil and gas industry will hesitate to increase tax on windfall profits and ban new licenses in the North SeaElsewhere, Labour’s approach has been broadly welcomed by a business community crippled by Brexit.

Improving the relationship with the EU is more on business’s radar than it appears to be on Labour’s radar.

A return to the single market and free movement, a shortcut to growth, was considered politically impossible in the short term, but Sir Keir and his team talked about a warmer relationship with Brussels and improving the terms of the current agreement .

Three years after implementation, the negative impact on British companies trading with Europe is indisputable, and companies large and small no longer hesitate to mention it.

Sócrates Camenon founded his food processing and distribution company, Golden Delight Foods, in the 1980s, routinely dealing with Greece and other European countries until Brexit.

“This has had a devastating impact,” he said.

“We have lost all our exports, we are having continuous problems with product shortages, prices are increasing and the administrative and bureaucratic difficulties are incomprehensible.

“The bureaucracy created a nightmare.

“If a businessman makes a mistake, he has to make a U-turn.

“We made a mistake, we have to go back there and renegotiate.

“We knew that the Europeans were not going to make things easy for us, they had to make an example of us to set an example for 27 other states.

“But we were the ones who suffered.”

The reduction in international bureaucracy will be welcome, but Labor’s plans to impose domestic bureaucracy in the form of labor reforms have caused significant anxiety.

The “new deal for workers” was demoted policy is tough for consultation, but remains fundamental to the Labor Party’s offer to voters.

The measures include promising “employment rights on day one”, including the right to parental leave and sick pay, ending “exploitative” zero-hours contracts and eliminating ethnicity and disability pay gaps.

With the living wage also increasing, these are potential costs felt more intensely by small and medium-sized companies.

Reeves’ prospect of equalizing the capital gains tax is also exerting some influence, a move that would end the unfairness of those who disguise income as capital gains by paying less tax than workers, but could dissuade wealth creators from who encourages taking risks.

The economic situation may bring some encouragement, with inflation stabilizing close to 2% and interest rate will likely fall next month, providing a small respite for households and buoying markets.

But Reeves and the future business secretary – Jonathan Reynolds has been in the role for more than two years – probably won’t have the luxury of reveling in it.

The in-tray is already full of thorny challenges, at the top of the pile Thames Water debt crisis and the prospect of special administration, effectively nationalization.

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Thames’ annual results will be published next Tuesday – and 48 hours later regulator Ofwat will announce what it and all other water companies will be able to charge their customers in future, with steep increases guaranteed.

If Thames Water continues to be, in the words of its chief executive, “uninvestable”, the new government may have no choice but to launch an administration that would be costly and possibly unlimited.

How this is handled and the outcome for Thames shareholders and creditors will have consequences for how the UK is viewed by the global investors the Labor Party relies on to fund the energy transition and beyond.

One nationalization that Labor is committed to is rail, albeit in stages as private contracts expire, and the commercial department will have to sign off on the deal. controversial foreign acquisition of Royal Mail’s parent company.

Also urgent will be an agreement with Tata about the future of its works in Port Talbot, a decision with much more baggage for the Labor Party than for the outgoing administration.