What does the Conservative Win mean for the UK Economy?


With a clear majority win for the Conservatives, the economy finally looks set to receive some much-needed stability and clarity on what we can expect to happen next.

Below is a summary of some of the predictions of what the Conservative victory will mean for markets, Brexit and the EU.


With the Conservatives acquiring a large majority, it is expected that the UK will leave the EU as planned on 31 January 2020 under the existing withdrawal agreement. While there is still scope for a potential two-year extension, Boris Johnson has declared he will not extend beyond December 2020, however, as is common with politics, nothing can be ruled out entirely.


Following the win announcement, UK shares and the pound reacted positively. It is thought that the increased levels of stability will now help the UK market become investable again, particularly to those who had previously shied away. Domestically focused sectors, such as stocks, banks, utilities, retailers and housebuilders, are amongst those experiencing the strongest post-election gains.

While the pound has strengthened by about 8-10% since its lows in August, it is still close to the bottom of its 40-year average trading range against the dollar. However, this low valuation compared to other markets means there are some real valuation opportunities for long-term investors.

UK Outlook

As mentioned in their manifesto, the Conservatives have promised increased spending, albeit only 0.3% above current levels. Public spending is also set to rise by 10%. Due to concerns over the global growth outlook, interest rates also look set to hold firm in 2020, although if the anticipated global growth materialises, rates could rise in 2021.

Other factors

While much of the focus has been on the election, other global factors have been affecting markets. With signs of progress on agreeing a 50% reduction to the existing US and China tariffs, and new proposed tariffs being scrapped, it is thought the news could help boost UK shares and create a better environment for global trade.

The EU

Experts predict that trade between the UK and the EU will become less volatile. Due to the majority win, Boris Johnson can now proceed to make a deal without being reliant on coalition partners or factions within his own party.
The topic of Scottish independence also continues to play its part in the UK’s role within the EU; with Scotland in favour of remaining, and the prospect of another referendum on independence being called, it will be interesting to see what the Prime Minister can do to convince them to remain part of the UK.


As a reminder, from a financial planning viewpoint, the Conservatives’ main manifesto proposals were:

Personal Taxes

  • No increases in income tax rates and National Insurance Contribution (NIC) rates
  • NIC threshold to be raised to £9,500 for 2020/21
  • A review and reform of Entrepreneur’s Relief


  • Corporation tax to remain at 19% rather than reduce to17% as currently legislated for
  • Increase R&D tax credit rate to 13% and review the definition of R&D
  • Increase NIC Employment Allowance from £3,000 to £4,000
  • No increase in VAT rates
  • Reduce business rates “via a fundamental review of the system”. Initially reduce business rates for retail businesses and extend the discount to grassroots music venues, small cinemas and pubs
  • Increase the straight line allowance for structures and buildings from 2% to 3%

Social Care

  • Additional funding of £1bn a year throughout the term of the Parliament
  • An effort to build a cross-party consensus on social care policy with a guarantee that no one needing care will have to sell their home to pay for it

Social Security, Housing

  • Continue the roll out of Universal Credit
  • End the working-age benefit freeze
  • 3% SDLT surcharge on non-UK resident buyers of residential property
  • End child benefit payments for children living overseas
  • Keep the state pension triple lock, the winter fuel payment, the older person’s bus pass and other pensioner benefits

Private Pensions

  • Within the first 30 days, hold an urgent review on annual allowance taper issues. A pre-election statement from the
  • Conservatives suggested this would only deal with the NHS problem, but it is hard to see how any reform can be restricted to just one part of the public sector
  • Conduct a comprehensive review to fix the issue of net pay pension schemes for those with earnings between £10,000 and £12,500
  • Reintroduce Pension Schemes Bill 2019-20, covering collective defined contribution (CDC), action against employer pension debt and pension dashboards
  • Unlock long-term capital in pension funds to invest in and commercialise scientific discoveries

Tuition Fees

  • Examine the interest rates on loan repayments with a view to reducing the burden of debt on students

The February Budget is also likely to see changes to inheritance tax (IHT) stemming from the Office of Tax Simplification (OTS) review of earlier this year – there was no comment on IHT in the Conservative manifesto.

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