Who'll fly high with Labour?

If Tony Blair wins the next election, some firms may prove more rewarding for investors than others

THERE are two ways the investor can anticipate a Labour Party victory at the next general election.

The easy way is to head for the bookies. Ladbroke's is offering 2 to 7 on a Labour victory. A stake of pounds 700 now would return pounds 900 if Labour wins. But there is betting tax, so in fact you have to stake pounds 763 to receive pounds 900, a return of less than 18 per cent . Moreover, you may have to wait until May 1997 to collect your winnings and, of course, you could lose.

The difficult but potentially more rewarding way is to invest in companies and sectors that might benefit from a period of Labour rule. And to avoid companies and sectors likely to be disadvantaged by Tony Blair in Number Ten.

Of course there are some who argue that a Labour victory would be disastrous for all shares, leading to a blow-out in government borrowings, higher taxes, a return to high inflation and the emergence of an anti-business culture. In fact, historically, the stock market has done well under Labour administrations. And Mr Blair and his front-bench colleagues have managed to calm the worst of City fears.

Analysts at the regional stockbroker Charles Stanley have identified several categories of potential winners from a Labour victory. The first category is companies with large overseas earnings. A weakening of the pound or a fully fledged sterling crisis would increase the value of repatriated earnings.

Most FT-SE 100 companies have some foreign earnings but the groups with the biggest proportionate overseas profits are BAT Industries, Redland, Carlton, RTZ, Glaxo Wellcome, Cable & Wireless, Shell, Hanson, GEC, Unilever, SmithKline Beecham, Grand Metropolitan and Tate & Lyle.

Labour's front bench remains vague about its precise policies, but it certainly believes in boosting transport infrastructure projects, in particular the rail network. There could also be a boost to the school- and hospital- building programme. If one sector stands out as a beneficiary, it is the bombed-out building and construction industry.

Among possible building winners picked by Charles Stanley are Hewden Stuart, Rugby Group, Alfred McAlpine, RMC, BICC, Y J Lovell, Taylor Woodrow, John Laing and Wimpey.

A third category of Labour-benefiting companies is waste management and recycling. Labour has a wide-ranging commitment to green issues. Measures are expected to force heavy industry to stricter standards on the removal and recycling of waste. The potential beneficiaries? Wessex Water, Caird Group, Shanks & McEwan, Waste Recycling Group and Leigh Interests.

The most glaring potential losers from a Labour victory are the public utilities. The fat-cat scandals have ensured that Labour could slap windfall- profits taxes on most of them without the slightest public opposition. The electricity companies are most threatened, followed by the water utilities.

Another obvious candidate for a windfall tax - or at least a tightening in its regulatory regime - is the National Lottery, which is run by the Camelot consortium. Its quoted shareholders are Racal, Cadbury Schweppes, De La Rue and ICL.

Labour will be desperately seeking areas to cut spending if it is to meet its election promises for increased spending in other areas such as education. The obvious department for the spending axe is defence. Losers here would be GEC, British Aerospace, Vickers, Huntings, Westland, Racal, Smiths Industries and Vosper Thorneycroft.

Another species of business that could find life tougher under Labour is the merchant banks. Labour has made it plain it wants to crack down on hostile takeover bids - the juiciest of fee earners for the merchant banks - perhaps forcing bidding companies to show their bids are in the public interest. Merchant banks still independent and quoted include Schroders, Cater Allen, Close Brothers, Hambros and Singer & Friedlander.

The spectre of a statutory minimum wage hangs over British business. Labour is committed to introducing one, though it refuses to say at what level. The biggest casualties would almost certainly be pubs, catering, hotels and restaurants, which helps explain the brewers' generous support for the Conservative Party.

One final vulnerable grouping is high-yielding stocks. Some of the Labour front bench is alarmed by the fashion for companies to pay out bumper dividends instead of re-investing profits in wealth creation for the future. The tax treatment of such pay-outs could change.

In the next year the Blair factor will be something to consider whatever share you invest in.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?