Britain’s largest companies have gained more than £30bn in value after Boris Johnson won the biggest Commons majority for the Conservatives since the 1980s, with shares in banks, housebuilders and utilities among the beneficiaries.
Shares in companies that had been earmarked by the Labour party for nationalisation, including energy and utility firms, rallied after voters opted to back another five years of Tory government. Friday was the biggest day of trading on the FTSE 100 – the index of Britain’s biggest listed businesses – since June 2017 as more than double the usual number of shares changed hands.
The pound initially rose by more than two cents against the dollar to above $1.35, before paring some of those gains to trade at about $1.33 late on Friday as traders digested the Tory victory. The euro also rallied by a similar amount, before slipping back slightly to trade around €1.20. Market watchers in the City of London viewed the result as positive because it ended parliamentary gridlock and the risk of a disorderly Brexit, while avoiding the Labour party’s plans for a comprehensive restructuring of the UK business landscape.
British billionaires, including high-profile Brexit backers and Tory donors, had a bumper day, as the FTSE 100 closed up by more than 1% on Friday and the more domestically focused FTSE 250 surged by about 3.5%. The combined value of the biggest 350 companies rose by about £33bn as stocks rallied on the election result, while the rising chance of a resolution in the US-China trade war also buoyed equities.
Shares in BT, which would have faced the nationalisation of its Openreach broadband division under a Labour government, rallied by more than 6%, while billions of pounds were added to the value of energy and water companies that were nationalisation targets including Severn Trent, Centrica and National Grid.
City analysts said the prospect of higher government spending would pave the way for stronger economic growth in future, but warned there could be a high degree of uncertainty ahead for the economy due to Brexit.
Though the Tory majority will enable Johnson to pass his EU withdrawal agreement, trade talks will be complex and the prime minister has left the option of a no-deal Brexit on the table for the end of 2020.
Ritu Vohora, an investment director at fund manager M&G Investments, said: “While the vote result is seen as a huge relief for markets, difficulties remain for the UK. The next phase of Brexit will continue to be challenging given that a tough few months of negotiations lie ahead on the nature of the future relationship with the EU.”