With Andy Burnham now installed in Number 10, he becomes the 6th UK prime minister to hold office in the past decade. Naturally, there is much speculation about his policies, the potential tax changes ahead, and the impact he may have on the country’s prospects. But, as we have said before, politics creates headlines, yet it rarely justifies changing an investment strategy, and history suggests it rarely determines long-term investment outcomes.
In our view, market performance is driven far more by forces largely outside the control of any single national government:
- Inflation
- Central bank interest-rate decisions
- Technological innovation
- Corporate earnings growth
- Geopolitical events and global trade
- Global economic growth trends
These are the factors that ultimately drive company profits, valuations, and investor returns. Governments can certainly influence the backdrop through taxation and regulation, but they rarely determine investment outcomes on their own, least of all one country’s government acting in isolation.
A global perspective
Our investment approach has always been globally diversified. Allocating capital around the world creates more opportunities to benefit from innovation and growth wherever it occurs, rather than being restricted to our home stock market.
Despite its importance to us, the UK represents only around 3–4% of the global stock market, small when compared with the US at roughly 60–65%. Moreover, the UK’s largest listed companies earn approximately three-quarters of their revenues overseas. Investing in the UK market is therefore not really a bet on the UK economy at all, but on a portfolio of global businesses that happen to be listed in London.
So, while political change in the UK generates headlines and, understandably, some concern, its actual impact on the UK equity market, and even more so on a globally diversified portfolio, is far more limited than most people expect.
Eleven prime ministers, one direction of travel
The chart above shows the FTSE All-Share (with dividends reinvested) since 1986, a period spanning eleven prime ministers and repeated changes of government. £100 invested at the end of 1985 had grown to around £2,500 by mid-2026, an average of roughly 8% a year, through Conservative and Labour governments alike. Monthly returns were positive about 63% of the time under Conservative governments and 60% under Labour, a difference small enough to make the point on its own.
Look at where the big moves actually happened: Black Monday, the dot-com crash, the Global Financial Crisis, COVID-19, Russia’s invasion of Ukraine. Every major fall was a global event, not the arrival or departure of any one prime minister.
The one partial exception, the mini-Budget of September 2022, in fact reinforces the lesson. A domestic policy misstep did briefly unsettle markets, but the damage fell mainly on gilts and sterling, the policy was reversed within weeks, and on a forty-year chart, the episode is barely visible. Even when Westminster does move markets, a diversified, long-term investor is best served by not reacting.
What a new prime minister does change, and how we respond
None of this means we ignore politics. A new government often brings a new Budget, and with it potential changes to tax allowances, pensions, capital gains and inheritance tax. These matter, not to how portfolios are invested, but to how your financial plan is structured.
That distinction is central to how we work. Our investment process does not change with the occupant of Number 10. Our financial planning, however, adapts continually to the tax and legislative landscape, and we will assess any announcements from the new government and act to benefit you, as we always have.
As ever, if you would like to discuss what the new government may mean for your own financial plan, please speak to your usual Taylor Money Wealth Manager.
