• The budget is not pro-business or growth – far from it
  • At least we now have a definition of “working people”
  • Is there any hope for UK growth? Actually, yes!

Well, there it is: Labour’s first budget, fittingly full of tricks but, sadly, few treats. Much has already been written about it, so I’m not going to go into exhaustive detail here.

But I will say a few things.

First, this is no pro-growth or business-friendly budget. Taxes are rising on investments (capital gains) and for workers across the income spectrum. There is a notable exception: some of the increased spending covers higher public sector salaries. Those workers will feel the tax pinch less than their private-sector counterparts.

At least this means we finally have a clear definition of “working people”: those in the public, not the private sector. The latter will face the full brunt of Labour’s tax increases.

Because this is not a pro-growth budget, it will not do anything to pull Britain out of its current stagnation. In fact, it might make it worse. And if growth disappoints going forward, then these tax increases might not raise much additional revenue, if any.

If tax revenue disappoints alongside spending increases, then the government’s budget situation is going to deteriorate over the next few years, rather than improve.

This may be what has spooked the bond market. Following the announcement, UK bond yields rose both outright and relative to other countries. They are now nearly as high as they were following the Truss-Kwarteng “mini-budget”. This is all the more worrying given that this budget was supposedly intended to improve, not worsen, public finances.

Source: Koyfin

Moreover, the FTSE 100 index lost nearly a percent on budget day, a partial confirmation that this was not received as a pro-businesses budget. It now lies below where it was when elections were announced back in May.

Source: Koyfin

Labour might not care about the market reaction to its tax and spending plans, at least not right now. But governments ignore the financial markets at their peril. Liz Truss and Kwasi Kwarteng learned this the hard way, and quickly.

If this government fails to support growth, while increasing spending, it will eventually learn the same lesson and find it ends up being a “one-term wonder”.

Faced with that prospect, the government may eventually pivot to more growth-supportive policies. These could include opportunities to develop energy resources. We’ve been banging this drum for some time: the UK has vast, untapped energy potential, if only the government gets out of the way and lets it happen.

This might go against Labour’s natural tendencies; however, in the absence of other options, they might be tempted by some low-hanging fruit in their own backyard.

One such energy source, in particular, has huge potential. If you know my colleague Sam Volkering, you know he’s been bullish on nuclear energy for some time now. Back in March, he released a video predicting we were on the brink of a global nuclear “reboot”—and the signs couldn’t be clearer.

In just the past year, top players like Morgan Stanley, Bank of America, Barclays and BNP Paribas have thrown their weight behind nuclear. Microsoft has even partnered with Constellation Energy to reboot the infamous Three Mile Island nuclear plant. And 22 nations, including the UK, US, and Japan, have pledged to triple their nuclear production.

Nuclear stocks are skyrocketing, and the momentum is only building. With 491 new reactors in the pipeline across 35 countries, we could be on the verge of a full-blown nuclear energy boom.

And to help you take advantage of this massive opportunity, he’s prepared an urgent briefing that outlines the top three steps you can take to position yourself for what’s next. You can watch it here.

Until next time,

John Butler
Investment Director, Fortune & Freedom