The UK economy is likely to be at the forefront of events this week, when we get the latest inflation, wages and unemployment data. Most of the political focus however, will be on general election manifestos, which always divide opinion.

In recent years it's been rare for political parties to show such a divergence in terms of policy intentions. Usually there’s not much to choose between them aside from perceptions of fiscal competency, which Labour has traditionally tended to struggle with.

This week we should get to see the full details around both the Conservative and Labour manifestos, even though we already have a good idea as to the contents of the Labour party one, which on the face of it looks like an ideological wish list from the 1970s. 

Unlike two years ago it looks like we’ll get to have a real difference between the economic plans of the two mainstream parties, and while the opinion polls point to a Conservative win, history tends to tell us that whoever wins, the shifting of the political agenda always tends to move towards the losing party in any case. How else to explain the decision by the Conservatives to adopt the 2015 Ed Miliband plan to put a cap on energy prices, which was rejected at the time.

Back in the 1970s my abiding memories were of the three day week, while having to do homework and read by candlelight as a result of regular rolling power cuts. Strikes seemed to be the only thing on the news throughout most of the decade, culminating in the biggest individual day of strike action since the 1926 General Strike, on 22 January 1979, and the so called Winter of Discontent.

During that winter, rubbish went uncollected, piling up in the streets, bodies went unburied and the country more or less ground to a halt when the train drivers, lorry drivers and road gritters also went on strike. Just prior to that, the UK got bailed out by the IMF in 1976, probably the ultimate humiliation for one of the biggest economies in the world.

It is through that prism that a lot of people over a certain age will view the proposals set out by the Labour party and the reaction of the markets to these proposals has been remarkably sanguine so far given their radical nature.

This is likely to be down to the fact that the Conservatives currently have a large poll lead and as such the perception is they are unlikely to be implemented. That being said, if the polls were to narrow, the effect on the pound could well be significant, let alone the potential for a ratings downgrade, as well as a sharp rise in UK borrowing costs.

Make no mistake, whatever your political persuasion, a government needs to show it can be fiscally responsible, particularly if it is looking to borrow large amounts of money, otherwise the verdict of the markets is likely to be brutal.

This is a variant of a piece that appeared in the print version of The Daily Telegraph on 16 May 2017.


Heightened market volatility is likely over the election period, which could result in widened spreads. We recommend that you monitor positions carefully, consider the use of appropriate risk management tools and maintain a sufficient account surplus throughout this period.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.