LONDON — The Labour Party won a sizable majority in the United Kingdom's general election on July 4, ending more than 14 years of government from the ruling Conservative Party.
While there is historic significance in the win — Conservatives have ruled for 80 of the past 124 years — hotel industry experts say it's unlikely hoteliers will see an immediate shift in fortunes.
Philip Camble, director at business consultancy Whitebridge, said he doesn't think the result will change the course that the hotel industry in the U.K. is already on.
“From a hotel performance perspective, the economy is not expected to change much in the short to medium term, so regional U.K. will remain steady as she goes, and London should continue on its post-COVID 19 recovery pathway," he said.
But the Labour Party campaigned on the message that change is needed and said its work begins immediately, and some of its policies have the potential to meaningfully affect hotels.
The new prime minister is Labour leader Keir Starmer, who started his tenure immediately after officially being asked by King Charles II at Buckingham Palace to form a new government.
Starmer’s first role is to form his Cabinet, with some Labour members of Parliament retaining their portfolios — albeit in an official capacity rather than a shadow capacity — and others being promoted or transferred.
One shift that could affect hoteliers and real-estate professionals is the the Labour Party's stated plan to spend £7.3 billion ($9.3 billion) over the next five years in a new National Wealth Fund that will match government spending to private investment.
The elimination of age bands to determine pay packets for those eligible for the National Living Wage is another Labour policy, but there weren't fine details of its plans. The party did say it would scrap zero-hour contracts and other employment strategies that it says do not afford employees suitable and necessary protection.
Ashley Webb, U.K. economist at Capital Economics, said that in its manifesto, Labour pledged to replace the business rates system with one designed to raise the same revenue but in a “fairer way.”
He added their new system will “level the playing field between the high street and online giants. We don’t know the details yet, but given hospitality businesses have a big physical presence, it’s possible this could mean hospitality businesses pay lower business rates in the future.”
Labour said its promised employment policy would see the end of such strategies as “fire and rehire,” and would give added protection for those on maternal or paternal leave and those suffering from long-term sickness.
The Labour Party win ends a long run of Conservative prime ministers, starting with David Cameron's tenure from May 2010 to July 2016, and also including:
- Theresa May (July 2016-July 2019)
- Boris Johnson (July 2019-September 2022)
- Liz Truss (September 2022-Oct. 2022)
Rishi Sunak (October 2022-July 2024)
Of those five, only Cameron and Johnson won general elections; the other three were voted to the top job by Conservative members.
Former Prime Minister Sunak has stepped down from his role on Friday. He retained his constituency seat so he will revert to being a backbencher in Parliament, the term given to non-Cabinet or non-shadow-Cabinet members of Parliament.
Summing up the defeat might be the example of Truss, who lost her constituency despite having a former majority of more than 26,000 votes.
She is out of Parliament along with 11 other former government Cabinet ministers.
Camble noted that the industry is likely to keep its existing trajectory for the balance of 2024.
“From a hotel mergers and acquisitions perspective, deals should continue to happen at a reasonable rate for the rest of this year,” he said, adding he saw plenty of deals “still in the pot."
David Goodger, managing director, Europe and Middle East at Tourism Economics, also said he doesn't see a sea change in hospitality from the outcome of the election.
“The result by itself shouldn’t have a material impact on expected performance. A Labour win has been priced in by markets, and we are not seeing any major shift in sentiment or in [pound] sterling that could have an effect on demand,” he said.
Whitebridge's Camble said from a hotel-development perspective, new build is still suffering from economic headwinds.
“Until [interest] rates come down, CapEx costs stabilize and supply chains settle down, development is likely to continue to be slow,” he said.
Labour also promised to create a £1.8 billion ($2.3 billion) fund to upgrade ports and build supply chains across the U.K, along with £1 billion to accelerate the deployment of carbon capture and £500 million to support the manufacturing of green hydrogen.
All talk of Brexit and a possible return of the U.K. to being a member of the European Union were studiously avoided by Labour politicians but is not off the discussion table, perhaps another reason the relatively newly formed and Euro-sceptic Reform Party picked up five constituencies and saw a large overall vote.
If the voting system in the U.K. was one of proportional representation, it would come close to being the second-largest party in Parliament.
Proportional representation has long been the call from the Liberal Democratic Party, the U.K.’s third party, which saw its number of seats increase to 72, the best performance by a third party in more than 100 years.
Camble said the financial markets have long expected the result that transpired and barely reacted on the news, in part because Labour had been very light on specifics in its manifesto.
“Longer term will depend on the actual policies Labour decides to implement … but [it] seemed to be pro-business overall, so hopefully they will be good for our sector,” he added.
Tourism Economics' Goodger said the markets would be keeping a close eye on policy changes, especially from a new government favored with a strong mandate.
“But for the time being, we continue to expect some improvement in economic growth with limited new policies announced. Inflation is now under control, and we will start to see interest-rate cuts resulting in some improvements in both business and consumer confidence, which may be exacerbated by the mood engendered by a new government.
“Continued improvements in hospitality performance are likely, in line with prior expectations,” Goodger added.
Webb said that concern at a Labour government, often branded as a tax-heavy one, is this time around more muted because the fiscal constraints are the same for Labour as they were for the Conservatives, and because Labour has pledged to follow very similar fiscal rules to the Conservatives.
“The combination of low economic growth and high interest rates means that fiscal policy needs to be tightened broadly in line with existing plans to meet those rules," he said.
He added that the composition of fiscal policy may be a bit more growth-friendly under Labour.
“Labour’s manifesto envisages public spending in 2028/2029 as being £9.5 billion (0.3% of gross domestic product) higher than current plans and taxes being £8.6 billion (also, roughly, 0.3% of GDP) higher. Typically, £1 more of public spending would add more to GDP than £1 more in taxes takes away. This may mean by 2028/2029 GDP is a bit higher than otherwise, although perhaps by only 0.1% to 0.2%, and even that is not a given. Even so, a slightly stronger economy would benefit the hotel and hospitality industry,” Webb said.
Pay Your Rates
Another manifesto pledge from Labour is a reform of business rates, including those paid by hotels.
Its manifesto did not state how this would be done, but hoteliers have long claimed they shoulder a heavier burden from the current business rates model due to hotels covering a larger square footage than most other businesses.
Business rates reform has been a central position from the U.K.’s principal hospitality membership organization, UKHospitality. That organization has also championed reform of the apprenticeship levy scheme, which Labour also said it would reorganize.
The Conservatives also said business rate reform was on the cards, but was similarly light on details other than to say it would put into action a £4.3 billion support package.
New Era
Overall, the election results were a landslide for Labour, only the second time it has won more than 400 seats (to be exact, 412), the other time being Tony Blair’s winning government in 1997.
The Conservatives were badly bruised, not only in England but also in Wales and in Scotland, where any calls for independence suffered a huge setback.
Labour lost a small handful of seats to independents, including Islington North to Labour’s former leader Jeremy Corbyn, who oversaw Labour’s worst-ever result in 2019 in the last general election.
In total, Labour gained 211 seats.