Skip to content
Search

Latest Stories

The pound, gilts and renewables: the winners and losers under Britain's future PM

Sunak has vowed to control inflation and accused his rival of pushing for unfunded tax cuts that only fuel price pressures.

The pound, gilts and renewables: the winners and losers under Britain's future PM

The race to be the next leader of Britain's ruling-Conservative Party and the country's prime minister is into its final leg, with the September outcome likely to shape the fortunes of sterling, gilts and UK stocks in coming months.

The contest between foreign minister Liz Truss and former finance minister Rishi Sunak to succeed Boris Johnson has centred on clear policy dividing lines.


Sunak has vowed to control inflation and accused his rival of pushing for unfunded tax cuts that only fuel price pressures. Truss has said her priority is to kickstart growth and the tax cuts she plans to do will not be inflationary.

Here's a look at some of the assets that could emerge as likely winners and losers.

STERLING RESPITE?

The pound could be a short-term winner. If either candidate embarks on tax cuts, the economy could get a short-term boost and the Bank of England (BoE) may be inclined to keep hiking rates to ward off further price pressures. Read full story

The sterling has slid 10% against the dollar this year. That's partly because the BoE has hiked at a slower pace than the Federal Reserve, even with Thursday's big rate hike.

A BoE more determined to raise rates because of looser fiscal policy should help the sterling.

But its longer-term fortunes will be tied to the economy. The BoE has just warned of a recession with a peak-to-trough fall in output of 2.1%.

If lower taxes fail to stimulate growth as Truss predicts, and worsens government finances, the sterling could struggle. Her proposal to review BoE independence could also weigh. Any greater government role in monetary policy would hurt confidence in Britain's economy.

GILTS GROUNDED

British government bonds, or gilts, are in the losers' camp for now. Investors sense the outcome, especially if Truss wins, will lead to more fiscal stimulus, higher inflation and rates.

Citi forecasts a further net fiscal boost of 40 billion pounds ($49 billion) over the coming 12 months, adding 0.8 percentage points (PPS) to economic growth by the end of 2023 and 0.4 PPS to underlying inflation by 2024.

ING economist James Smith said that 30 billion pounds of tax cuts, as proposed by Truss, would likely require an extra 25-50 bps of BoE tightening.

Higher rates for longer could further lift 10-year gilt yields, already up almost 100 bps this year to 1.92% GB10YT=RR.

LEVELLING UP THE FTSE

Higher bond yields could hurt equities, especially growth stocks, said Investec chief economist Philip Shaw, noting the difficulty in making sector-specific conclusions just yet.

"For example, hypothetically are we looking at more levelling up? If we are, perhaps infrastructure stocks could get a boost, but we were hearing Truss was trying to cut salaries outside London, which doesn't exactly signal a commitment to levelling up," he said.

Truss has backtracked on a pledge to introduce regional pay boards. Johnson's "levelling up" agenda to reduce regional inequalities helped his 2019 election win.

Truss' promise to halt an increase in corporation tax also means stock markets might welcome a Truss victory over a Sunak one, although the outlook for the economy will likely remain the bigger driver.

The FTSE 100 is up just 0.9% in 2022 but has outperformed European shares which are down 10%.

DEFENCE, RENEWABLES, INSURERS

Some sectors were in focus as the contest plays out.

AJ Bell's head of investment analysis Laith Khalaf said Truss' plans to raise defence spending to 3% of economic growth could give defence stocks "a little pump".

Focus on security spending following Russia's invasion of Ukraine has helped lift the FTSE 350 aerospace and defence sub-index. FTNMX502010 almost 15% this year, versus a broader 1.8% drop for the FTSE 350.FTLC.

Khalaf added that a Sunak victory could boost the renewable sector given Sunak's "full-throated commitment to net zero".

Truss has said she will review how Britain will reach its 2050 net zero targets to see how it can be done in a more "market-friendly" way. Read full story

Finally, insurers such as Aviva AV.L and Legal & General could be among the winners.

Truss has said she wants to reform Solvency II rules, a legacy of EU membership, which govern the number of capital insurers need to hold against their investments.

Insurers are lobbying to hold less capital against riskier assets such as infrastructure, a change which they say will help them fund economic growth.

(Reuters)

More For You

Baiju Bhatt

At 40, Bhatt is the only person of Indian origin in this group, which includes figures such as Meta’s Mark Zuckerberg. (Photo: Getty Images)

Baiju Bhatt named among youngest billionaires in US by Forbes

INDIAN-AMERICAN entrepreneur Baiju Bhatt, co-founder of the commission-free trading platform Robinhood, has been named among the 10 youngest billionaires in the United States in the 2025 Forbes 400 list.

At 40, Bhatt is the only person of Indian origin in this group, which includes figures such as Meta’s Mark Zuckerberg. Forbes estimates his net worth at around USD 6–7 billion (£4.4–5.1 billion), primarily from his roughly 6 per cent ownership in Robinhood.

Keep ReadingShow less
Mandelson-Getty

Starmer dismissed Mandelson on Thursday after reading emails published by Bloomberg in which Mandelson defended Jeffrey Epstein following his 2008 conviction. (Photo: Getty Images)

Getty Images

Minister says Mandelson should never have been appointed

A CABINET minister has said Peter Mandelson should not have been made UK ambassador to the US, as criticism mounted over prime minister Keir Starmer’s judgment in appointing him.

Douglas Alexander, the Scotland secretary, told the BBC that Mandelson’s appointment was seen as “high-risk, high-reward” but that newly revealed emails changed the situation.

Keep ReadingShow less
Shivani Raja MP leads fight to save Leicester Diwali celebrations

Shivani Raja MP

Shivani Raja MP leads fight to save Leicester Diwali celebrations

TWO Conservative MPs have launched a petition to stop Leicester City Council cutting back this year's Diwali celebrations.

Shivani Raja, MP for Leicester East, and Neil O'Brien, who represents nearby Harborough, Oadby and Wigston, started the Change.org petition on Wednesday (10) after the council announced plans to remove key elements from the October 20 event.

Keep ReadingShow less
Indian American hotel employee beheaded in Dallas

Chandra Nagamallaiah (R) was stabbed and beheaded on duty; Yordanis Cobos-Martinez was arrested and charged for the killing.

Indian American hotel employee beheaded in Dallas

A STAFF MEMBER at Downtown Suites Dallas, US, was killed on Wednesday (10) morning. Chandra Nagamallaiah, 50, was stabbed and beheaded on duty in front of his wife and son, according to reports.

Yordanis Cobos-Martinez, 37, was arrested and charged in the killing, which reportedly stemmed from an argument over a broken washing machine, media reports said, citing the Dallas Police Department.

Keep ReadingShow less
Deadly Pakistan floods force over two million to flee their homes

Residents sit in a rescue boat as they evacuate following monsoon rains and rising water levels in the Chenab River, in Basti Khan Bela, on the outskirts of Jalalpur Pirwala, Punjab province, Pakistan, September 10, 2025. REUTERS/Quratulain Asim

Deadly Pakistan floods force over two million to flee their homes

OVER two million people have been forced to leave their homes as devastating floods continue to sweep across Pakistan's eastern regions, authorities announced.

The worst-hit area is Punjab province, where more than two million residents have been evacuated. An additional 150,000 people have fled Sindh province, according to national disaster management chief Inam Haider Malik, who warned that the "number may rise over the coming days".

Keep ReadingShow less