As the UK embraces a new administration it may be worthwhile looking back through history to see how the historical economic records of both Labour and Conservative stack up. Simon French, chief economist at Panmure Liberum, interrogated data since 1955 and found hardly any difference in economic growth between the two major parties (as measured by quarterly GDP growth). Labour marginally edge it at 0.59% versus 0.57% for the Conservatives.
Digging deeper the data reveal further nuggets which some may find surprising given they may challenge common preconceptions. French found that relative equity market performance was modestly better and fiscal deficits smaller under… Labour! While the Conservatives oversaw stronger Sterling performance and higher company profit margins. We would caveat that the data are derived from a relatively small sample size with therefore less reliable statistical significance.
And what about situations where there were sizable majorities? A study by Man Group found in these instances that historically the UK enjoyed above average growth. Let’s hope history rhymes. Given limited fiscal flexibility for our new Chancellor of the Exchequer the role of equity in financing essential investment should take centre stage. You can’t tax your way to prosperity after all.
