- In the past, Labour governments have delivered better annualised returns.
- Prime Ministers Harold Wilson and Jim Callaghan were the most lucrative
Investors will be pondering what the future holds with the Labour Party now in power.
An analysis of historical data shows that the Labour Party has largely achieved positive results when in power.
The FTSE 250 rose as much as 1.7 per cent on Friday morning on news of the new government, although most of the gains evaporated by afternoon.
New leader: Keir Starmer has promised changes as he replaces Rishi Sunak as the new prime minister
In the past, Labour governments have generated market returns more than double those of Conservatives, according to analysis by InvestEngine.
This is based on 18 years of Labour government, compared to 36 years for the Conservatives.
Andrew Prosser, chief investment officer at InvestEngine, said: ‘The data shows a Labour government is more than twice as ‘friendly’ to UK businesses, with returns of almost 11 per cent compared with just over 5 per cent under the Conservatives.
‘Of the 13 prime ministers we’ve had since 1970, only four have been Labour compared to nine Conservatives, but when it comes to annualised returns, the two best-performing prime ministers are Labour.’
Harold Wilson’s period as prime minister, between 1974 and 1976, proved to be the most lucrative in terms of annualised returns, with an average return of 20 per cent per year.
Meanwhile, Jim Callaghan’s tenure as prime minister also posted annualised returns of 20 per cent.
While Margaret Thatcher and John Major each earned returns of 488 per cent and 159 per cent over their terms as prime ministers, these only translate into annualised returns of 17 per cent and 16 per cent respectively.
Similarly, Tony Blair sits in the middle of the pack, with annualised returns of just seven per cent, despite an overall return of 92 per cent.
David Cameron had some success with a nine per cent return while in coalition with Nick Clegg, but this fell to just one per cent during his solo tenure.
The data shown below is based on the total net return of the MSCI UK GBP Index between June 1970 and July 2024. It measures the performance of the large and mid-cap segments of the UK market.
| Prime Minister | Years in office | Party | Total return over the term | Annualized return |
|---|---|---|---|---|
| Harold Wilson | 1974-1976 | Labour | 47% | twenty% |
| Jim Callaghan | 1976-1979 | Labour | 74% | twenty% |
| Margaret Thatcher | 1979-1990 | Conservative | 488% | 17% |
| John Major | 1990-1997 | Conservative | 159% | sixteen% |
| Mr Sunak | 2022-2024 | Conservative | 24% | 13% |
| David Cameron and Nick Clegg | 2010-2015 | Conservative/Lib Dem | 54% | 9% |
| Teresa May | 2016-2019 | Conservative | 26% | 8% |
| Tony Blair | 1997-2007 | Labour | 92% | 7% |
| Edward Heath | 1970-1974 | Conservative | 26% | 6% |
| Boris Johnson | 2019-2022 | Conservative | 10% | 3% |
| David Cameron | 2015-2016 | Conservative | 1% | 1% |
| Gordon Brown | 2007-2010 | Labour | -9% | -3% |
| Liz Truss | 2022-2022 | Conservative | -4% | -25% |
| Source: InvestEngine | ||||
While Gordon Brown’s tenure delivered the worst total return, at -9 per cent, this translates into a negative annualised return of three per cent.
Meanwhile, Liz Truss, while performing better overall during her tenure, her short time in Downing Street means that on an annual basis her tenure had a negative return of 25 per cent.
“It is perhaps no surprise that in last place, with negative annualised returns of 25 per cent, is Liz Truss during her historically short 50-day tenure,” Prosser said.
What does this mean for Keir Starmer’s tenure as Prime Minister?
Given their time in power, the Conservatives would have delivered better cumulative returns, InvestEngine said.
As a result, he said prioritizing a buy-and-hold strategy is the most effective way to grow wealth, rather than being swayed by political changes.
“Despite the fact that annualised returns under the Conservatives are lower, £100 would have grown to £4,902 under Conservative governments, but only £447 under Labour, simply because they have been in power longer,” Prosser said.
‘However, if investors had held on to that £100 throughout all political regimes, that same £100 would be worth £21,893 today.’
“For any investor, the greatest asset you can have is time – the longer you invest your money, the more time it has to grow. Time in the market also gives portfolios the opportunity to benefit from the wonders of compound interest,” he said.
Given the initial positive reaction from markets, investors are likely to remain hopeful that history will repeat itself.
