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Utility stocks sink as investors weigh surprise general election

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Labor deputy leader Angela Rayner and Keir Starmer prepare to reveal plans for UK utilities if the party wins the July 4 general election.

London-listed utility shares plunged today as investors digested the impending general election.

The nation’s fragile infrastructure, recent spikes in consumer bills and public outrage over pollution and discharge failures by water companies are likely to come under the microscope ahead of the July 4 vote, and will expects Keir Starmer’s Labor Party to propose major restructuring in some areas.

National Networkwhich is also suffering the impact of a planned capital increase of £7bn, Severn Trento, United Public Services Group, ESS and central They were among the biggest fallers on the FTSE 100.

National Grid fell the most at 3:30 p.m., down 11.3 percent.

Meanwhile, Drax Group and owner of South West Water, under fire Banner were the biggest drag on the FTSE 250, falling more than 5 per cent each.

Labor deputy leader Angela Rayner and Keir Starmer prepare to reveal plans for UK utilities if the party wins the July 4 general election.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “A tougher stance towards water companies that pollute rivers and seas is likely to weigh most heavily on the utilities sector.

‘(Labour) plans to give the regulator more power to increase fines and force companies to strip executives of bonuses.

“The cost of repairs to inefficient and leaking infrastructure is already a heavy future burden, and with the risk of fines becoming more severe, the UK water services sector is likely to become even less attractive.”

He added that Labor would likely enact a “significant restructuring of the public transport sector”, with plans to allow more councils to run bus franchises and renationalise the country’s rail network by not renewing contracts with private operators.

Streeter said: “This will affect companies such as First Group, which offers services in the West, commuter services in London and an Edinburgh to London route.” Mobico also runs bus services in the West Midlands, so could also be affected by increased competition.

“However, given that other railway companies are already under state control, further renationalisation would not be a big surprise, so it is unlikely to change the dial much in terms of share prices.”

Last October, Labor members voted to nationalize critical infrastructure, moving ownership of the rail and energy sector into public ownership.

However, Starmer’s team is thought to be unlikely to commit to such a plan in the party’s next manifesto.

Starmer has previously pledged to move rail infrastructure into public ownership, but high-profile Labor figures have openly said the party will not touch energy.

Shadow business secretary Jonathan Reynolds told the BBC late last year: “We are not going to nationalize the energy system.”

However, the Labor Party has pledged to launch the “public clean energy company” GB Energy, which the party says will “harness Britain’s solar, wind and wave energy” to save UK households £93bn. United, create “thousands” of jobs and deliver “100 percent clean energy by 2030.”

“UK investors have become accustomed to political drama in recent years”

Despite the pressure on utility stocks, ING analysts noted Thursday that the market has largely ignored the prospect of an imminent election.

They said: ‘UK Prime Minister Rishi Sunak took the country by surprise and called a snap election for July 4, setting the stage for a short and quick campaign.

‘But you wouldn’t know it if you look at the UK markets, where the impact so far has been minimal.

“UK investors have become accustomed to political drama in recent years.”

ING suggested that investors’ muted reaction to the snap election is partly due to the significant poll lead Labor currently enjoys, and that the result looks like a “foregone conclusion” amid a 20-point lead among the majority of pollsters.

They also note that, unlike 2019, “Brexit is no longer a big unknown,” meaning that “the country’s economic relationship has been resolved and none of the main parties are willing to reopen the debate.”

ING said markets are also calm about the prospect that another referendum on Scottish independence is “unlikely”, while “neither party is promising radical changes to fiscal policy”.

Finally, the investment bank said an election does not change the outlook for the Bank of England’s interest cuts this summer, the main driver of market gains this year.

The analysts said: “The independence of the Bank of England is a well-established and respected principle among the main parties, and a rate cut has been telegraphed long before the election was called.”

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