LONDON, Sept 3 — Britain faces the prospect of a general election in the near future, with investors concerned not just about a no-deal Brexit — but also a potential Labour government led by Jeremy Corbyn.
Labour Party leader Corbyn has vowed to redistribute wealth to address inequality and his policies are widely regarded as being unfriendly towards business.
Here is a brief overview of Corbyn’s economic strategy:
What are Corbyn’s policies?
The Labour leader wants to nationalise Britain’s railway, energy, water sectors, as well as its postal operator the Royal Mail.
He will seek to improve employees’ rights and lift the national minimum wage to £10 per hour by 2020. That compares with its current level of £8.21 for workers aged 21 and over.
Corbyn would also embark upon a massive infrastructure investment drive to plough billions into key priorities like education, health, social housing and transport.
Labour has meanwhile committed to increase funding for the state-run National Health Service by £30 billion over five years.
Corbyn wants to pay for all these promises with large hikes both in corporation tax — levied on company profits — and the top level of income tax on the nation’s richest people.
He also wants to transfer 10-per cent of shares in every big company to employees, under plans which have drawn sharp criticism from some quarters.
Corbyn has meanwhile expressed doubts over reaching a free trade deal with US President Donald Trump, in sharp contrast with Boris Johnson.
What do markets think?
Many analysts believe that a Corbyn administration could spark an exodus in foreign capital and companies, while taxation and public debt could soar to foot the bill for his spending pledges.
David Madden, analyst at trading firm CMC Markets, predicted the British pound and stock market could tank in the event of Corbyn winning the keys to 10 Downing Street.
“Should we see a Labour government, I think the pound would have a selloff, the FTSE 250 and 100 as well,” he added in reference to London’s secondary and primary stocks indices.
“Corbyn is not very pro-business; he’s actually very anti-business.
“The fear is that some organisations would withdraw their operations from the country.”
Saxobank analyst Steen Jakobsen was more forthright in his assessment.
“He can’t pay for it all. It is the illusion of politics and the never-ending promises of spending other people’s money,” he told AFP.
What about Brexit?
Socialist Corbyn has been a long-time sceptic of the European Union and its free-trade policies but has so far kept his cards close to his chest regarding Brexit.
The Labour Party has endorsed the possibility of a second vote, but its members and leadership appear to be at loggerheads over whether that should include the option to remain in the EU.
But some analysts argue that a no-deal Brexit would have far bigger adverse economic impact than Corbyn as prime minister.
“A no-deal Brexit would be so catastrophic for the economy, it would give such a large hit, it would be much worse than anything Jeremy Corbyn could do,” London School of Economics professor John Van Reenen told AFP.
“The EU is the biggest market ever created on planet Earth, so after Brexit, inevitably there will be trade barriers between the UK and the rest of Europe.”
David Blunt, economics professor at City, University of London, agreed.
“Right now, UK plc is coming to realise that the threat of a no deal Brexit is more real and damaging than any potential democratic socialist project associated with Corbyn,” he noted.” — AFP
