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What Does a Change in Prime Minister Mean for Your Finances?
On 22 June, Keir Starmer announced he would quit as Labour Party leader. The decision had been anticipated in the media, but the changes still pose some uncertainty over the coming weeks. Read on to find out what it could mean for your finances.
The Labour Party will need to decide on a new leader, which could cause market volatility. Once a new leader is in place, they will have control over fiscal policy that could affect business and personal finances.
The key message
While a change in political leadership can feel worrisome when you consider your finances, taking a long-term view is what matters most.
What happened to markets after the announcement?
Investment markets may experience volatility in response to uncertainty, which could affect the value of your investments. But here is what actually happened:
0.01%
The FTSE 250 fell just 0.01% following the announcement. Markets largely shrugged off the news as the resignation was expected.
7
Prime ministers the UK has had in the last decade. Despite periods of volatility after each change, the overall market trend has been upwards.
As the new prime minister is announced and sets out their vision for the UK, markets could experience greater volatility, particularly if there are any surprises. While this might feel disconcerting, keep in mind that short-term volatility is a normal part of investing, and markets have historically recovered.
“Rather than reviewing your portfolio every day, take a look at the bigger picture. Performance assessed over several years tells a very different story to short-term noise.”
How should you respond?
Avoid knee-jerk reactions
Sticking to your long-term investment strategy instead of making impulsive decisions is almost always the right move during periods of political change.
Don’t act on speculation
With so much media speculation, it can be difficult to know what information is accurate before it’s officially announced. Reacting to unconfirmed headlines could lead to unnecessary changes that harm your long-term goals.
You’ll have time to assess changes
When policy changes are unveiled, they are rarely implemented immediately. You will typically have an opportunity to fully assess your options rather than needing to make a snap decision.
We’re watching on your behalf
As your financial planner, we could alert you if anything might affect your long-term financial plan and help you assess how changes might impact you personally.
Could policy changes affect your personal finances?
The new prime minister might choose to go in a different direction from the previous one. For example, they could change tax rates or allowances, which might affect your personal finances.
Worth remembering: While the potential for change could prompt some people to alter their financial plans, this often is not the best course of action. Reacting to rumours could lead you to make decisions based on scenarios that never materialise or ones that simply don’t align with your objectives.
Have questions about what this means for you?
If you’d like to talk to us about anything discussed in this article, please do reach out. Over the coming weeks there is likely to be a lot of speculation, and we’re here to help you separate the noise from what actually matters for your finances. Get in touch via our contact form or find us on Instagram at @emmelia_pws.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only. All information is correct at the time of writing and is subject to change in the future. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change. The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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