May Forges “Government of Certainty”

This article was originally published on Quadrant Group’s website. Quadrant Group was acquired by Progeny in March 2017.

Friday morning saw the UK wake up to a hung Parliament, with no party holding an absolute majority. Such is the unpredictability of a parliamentary democracy. But a morning is a long time in politics and by lunchtime Theresa May had sought permission from the Queen to form a government, using the support of the Democratic Unionist Party to give her the crucial majority the Conservatives needed.

We are going through a time of significant political turmoil. The last few weeks have highlighted the divide in opinion in the country over the role and size of the state in our lives, with further austerity and a shrinking state on the one hand, and a material rise in spending (and taxation for some) on the other. Each of us has our own feel for what we believe to be best for ourselves and the country, which we were able to express at the ballot box yesterday. We also remain, as a nation, somewhat divided on the Brexit issue, although perhaps mostly united in the reality that it is going to go ahead, in one form or another, respecting the will of the (slim) majority.

Amidst the party-political point-scoring and the personal attacks between the leaders of the two main parties which dominated the campaign, it was easy to forget the policy positions set out in the manifestos. Now Theresa May is endeavouring to form a government it would be a good time to consider what implications a Conservative government would have for investors and where they stand on the key topics.


On tax, the Conservatives have said they will stand by their existing plan to raise the higher-rate, 40pc, threshold to £50,000, up from £45,000, by 2020. The personal allowance will increase to £12,500, from £11,500. The manifesto also pledged that the Tories would not raise VAT and would keep taxes generally “as low as possible”. They have said they will stick to their promise to reduce corporation tax to 17%, the lowest rate for any developed economy, with the aim of bringing ‘huge investment and many thousands of jobs to the UK.’ The inheritance tax plans announced in the Budget remain unchanged, and add £100,000 per person in respect of the main family residence to the normal £325,000-per-person tax-free band. The manifesto also contains a pledge to “simplify the tax system” but offers no detail on how this might be achieved in practice.


The “triple lock” on state pension increases will be abandoned in 2020 by a Tory government. They would move to a ‘double-lock’ where the state pension would no longer rise by a minimum of 2.5 per cent each year, but by whichever is the highest of inflation or annual earnings growth.

They have outlined proposals to grant new powers to the Pensions Regulator and the Pension Protection Fund, following the high-profile collapse of the likes of BHS. Watchdogs would be able to stop “mergers, takeovers or large financial commitments” that threaten pension schemes or fine “those found to have wilfully left a pension scheme under-resourced”. Some commentators have suggested his could have a knock-on effect for investors as it may mean the diverting of dividends to fund struggling pension schemes.


The Conservatives have pledged to reform the business rates system in response to the challenges they present to smaller companies. They have promised more frequent revaluations to avoid significant increases to the bills, while exploring options for self-assessments in the valuation process. They will also ensure the system reflects a world in which people increasingly shop online. Additionally, they will seek to support innovation by small and start-up firms and improve the general business environment for SMEs, using government buying power to ensure that big contractors comply with the Prompt Payment Code both on government contracts and in their work with others. Where they don’t comply, they lose the right to bid for government contracts.

Social Care

The Conservatives now famous U-turn on social care proposals may end up being seen as a pivotal moment in their embattled campaign. Their current position is that they have promised an “absolute limit” on the amount people will have to pay for their care but so far they have not said what that limit will be. Despite no cap being explicitly mentioned in the manifesto, Theresa May has now promised a consultation in the form of a government green paper on the issue which is expected to offer more detail on the limit.

Strong and Stable Portfolios (if not government)

In turbulent political environments such as this, taking advice from financial advisers can help to ensure that your investment portfolio is well positioned to weather any storms both now and in the future. Here are some points to keep in mind:

  • The portfolios we assemble and manage are highly diversified through the thousands of equities and bonds they hold and the countries they are invested in.
  • Our clients’ non-UK equities are unhedged, which means that clients hold this portion of their portfolio in non-GBP currencies. In the event of a fall in the value of Sterling (GBP) these overseas assets will be worth more in Sterling terms.
  • Their bond holdings – which are hedged – are diversified across global markets, reducing the impact of any rise in the cost of borrowing that might occur on account of the greater uncertainty that the UK faces at this time.
  • While markets don’t like uncertainty, the UK is a relatively small fish in the global pond and this morning’s result is just a ripple.
  • Portfolios go up and down; they always have and they always will. If you don’t need to spend the money today, don’t worry about what happens in the coming days, weeks and months.

Although the election result, and a degree of ongoing uncertainty over Brexit, may feel uncomfortable for some, let’s keep it in proportion. We live in a tolerant, open society and, by the look of the greater level of engagement in the election by the younger generation, a healthy democracy that cares passionately about its future. Put the kettle on, have a nice cup of tea and celebrate this next – if unpredicted and a little uncertain – step for our nation.

This article does not constitute financial advice. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner to take into account your particular investment objectives, financial situation and individual needs. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and the value of investments can fall as well as rise. No representation is made that the stated results will be replicated.

Andrew Pereira

Director, Wealth

Andrew has been working with families, high-net-worth clients and business owners for well over 20 years.

Learn more about Andrew Pereira