This is how a Labour government would affect four key asset groups

Catherine Neilan
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Shadow Chancellor John McDonnell Delivers His Keynote Speech To Labour Party Conference
Labour are not the only ones planning for the economic impact of a Corbyn government (Source: Getty)

It's not just Labour who is preparing for shocks to the economic system under a Jeremy Corbyn-led government.

Investment management firm Heartwood has been preparing for what impact a lurch to the left (specifically "an administration favouring higher levels of state intervention" and a "less corporate-friendly environment") would have on UK assets.

Here's what the team has come up with.


Heartwood is going for the safe option at the moment, with large cap companies listed in the UK but operating primarily overseas. This would offer a sterling hedge, but also comes about because Heartwood expects domestically-focused sectors, such as retail, banking and property, to be hardest hit by a Labour government. It is also concerned about the impact any renationalisation might have on utilities firms, while small caps would be more likely affected by volatility.

Government bonds

In order to back up those pledges of major state intervention, the government will have to borrow more. Heartwood is therefore expecting funding costs to rise, with gilt yields following suit.

"We would therefore keep our exposure here very controlled, as it is now, with very short duration," says investment director Michael Stanes.


Heartwood sounds particularly cautious on this as an asset class, reducing portfolios to their lowest exposure in five years. London and residential markets are where the group are most cautious, with "some exposure" to commercial markets - although this was reduced "quite some time ago". ​


It looks like Labour was right to "war game" a run on the pound if they take power. Heartwood believes a short-term run might be expected, but notes that even under the Conservatives sterling has "depreciated considerably". The pound has fallen against the euro by around 12 per cent since the Brexit vote, taking it to post-crash levels last month.

That means, portfolio-wise, little needs to be done.

"To make a further move out of sterling at this point, we would therefore need to have a relatively high conviction that a Labour administration or agenda is going to come to pass," Stanes says.

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