Since Keir Starmer took charge as UK Prime Minister just over a month ago, his approval ratings have dropped dramatically. According to data from Opinium, his ratings have plateaued by 26% in a month, and is now at a dismal -7%.
On the back of this, the Prime Minister has attracted widespread criticism of his policies as well as his handling of the brewing civil unrest.
A petition of over 200,000 signatures has called for his resignation. Amongst the list of reasons, signatories claim that Starmer’s tenure has been marked by indecisiveness, a lack of clear direction, and failure to effectively communicate the Labour party’s vision.
These developments have come in contrast to the calls of confidence made by several political analysts, fund managers, and investment banks not too long ago. Andrew Marr said that the transition would bring a “period of stability”, and this was echoed by large institutions such as JPMorgan and Pantheon Macroeconomics. They predicted that the new government would be a “net positive” for the economy and markets, and would lift asset prices and boost investment.
Whilst that has happened thus far, with house prices back on the rise, and the FTSE 350 up over the past month, it’s the medium-to-long term that could dampen the outlook. Rumours of a potential hike in Capital Gains Tax (CGT) to bring it in line with income tax, as well as a lack of urgency to reform the business rates tax have softened the optimism, as such high taxes could result in continued outflows from the UK market and a lack of business investment.
According to the Department for Business and Trade, the number of new Foreign Direct Investment (FDI) projects fell 6% in the latest fiscal year (1,555). This is a hair’s breadth away from the pandemic low of 1,538 new FDI projects. And with an uncertain social climate emerging under Starmer, this year’s numbers may end up being worse, which would hamper a key driver of growth in productivity and living standards.
Michelle Lawson, Director at Lawson Financial commented: “Starmer and Labour weren’t popular to begin with, as they were a change and the least worst vote. It’s worth remembering that they were only voted in by 30% of half the voting populaton, so he was already on the back foot.
“Their policies were always doubtful and unfavourable, but the Tories had had their day and 14 years of chances. UK plc has had years of doom and gloom and people were fed up and wanted change. Governing will mean that unpopular decisions will need to be made.
“However, there is a fine line between unpopular and catastrophic, so they should tread carefully and listen to those that know and act with integrity, and apply the advice and common sense afforded to them.”
John Choong, Head of Equities and Markets at Investors Edge: “Beware the siren song of investment banks and their rosy predictions. While JPMorgan heralded Starmer’s super majority as an end to “policy paralysis,” they’ve missed the forest for the trees.
“While a decisive government might grease some wheels, many experts seem to have forgotten to consider the cost. With CGT potentially skyrocketing and business rates stagnating for now, we’re trading one paralysis for another. Recent history shows that hung parliaments and political gridlocks often yield better market performance, as markets dislike uncertainty – and that’s true in both the UK and US.
“The latest EY investor survey shows a record 69% intend to invest in the UK in 2024, offering a glimmer of hope. However, this was taken before the storm of civil unrest. As Starmer’s approval ratings plummet and FDI teeters on pandemic lows, it’s clear that the grass isn’t always greener on the other side, and sometimes, the view from the ivory tower is more mirage than reality.”