Analysts say millions of savers with cash tied up in utilities, telecoms and banks risk being ‘crushed’ if a Labour government is elected
Millions of savers with cash tied up in utilities, telecoms and banks risk being ‘crushed’ if a Labour government is elected, according to analysts.
A victory for Jeremy Corbyn – who has threatened to nationalise entire industries – on December 12 would send the pound plunging while shares in a host of firms would be pushed into the red, according to research by Jefferies.
Outlining bleak scenarios that could unfold, the broker’s analysts warn shares in BT, National Grid, Royal Mail, Royal Bank of Scotland, electricity provider SSE, William Hill and water firms Severn Trent, Pennon and United Utilities will be the worst-hit if Labour wins power.
The stocks are among the most widely held by retail investors, meaning savers with pensions and other nest eggs would be hammered. The ‘only real beneficiaries’ under Labour would be exporters, said the analysts, because sterling’s ‘inexorable’ drop in value would make their products cheaper overseas.
‘Utilities, telecoms and banks get crushed,’ they added.
In their research note, headed ‘A TV guide for investors’, Jefferies analysts detail four election outcomes, framed as ‘Christmas movies’. They say there is a 10 per cent chance of a Labour majority – a scenario dubbed Trading Places after the 1983 film starring Dan Aykroyd and Eddie Murphy.
In this outcome they predict there would be a ‘good chance’ of Britain remaining in the EU and a flood of Government spending in 2020 and 2021 that would initially boost the economy.
But they also warn that in the longer term the outlook for a host of UK stocks held by small shareholders is bleak.
The ‘most negative’ hit would be to SSE, National Grid, Severn Trent, Pennon and United Utilities, which face having their industries brought back into public ownership. Severn Trent shares could plunge by as much as 43 per cent, Jefferies said, while SSE could lose 15 per cent of its value.
BT faces a drop in value of 45 per cent because of Labour’s plan to nationalise its broadband business, while bus and rail operators would be hit by plans to re-nationalise the rail industry and hand councils control of bus services. Royal Mail shares could halve in value if the party presses ahead with plans to renationalise the company, while RBS shares could initially plunge by 30 per cent with the bank hit by rising finance costs.
The gambling sector would be hammered as well, because of plans for far stricter regulations.
However, Jefferies said big exporters, including British American Tobacco, Rolls-Royce, Unilever and Tate & Lyle, stood to benefit.
The analysis suggests that millions of savers and pensioners will see the value of their investments plummet. They could also lose out on prices offered for firms that stand to be nationalised, if they are not bought for their full market values.
Labour claims the proposals will ‘bring vital areas of our economy into public ownership, so they can be run by and for the people’.
A ‘Home Alone’ Tory majority – given a 30 per cent likelihood – would see the UK press ahead with Brexit and give domestically focused stocks such as banks, retailers, utilities and the pound a boost, with exporters losing out.
Last night a Labour spokesman said: ‘Labour is proud of our plans to take on the powerful who are doing so well out of the current system which rips off customers. We welcome their opposition.
‘It’s hardly surprising that those who will profit from keeping things as they are don’t want things to change.’