Britain's Labour Party cruises to election victory

Keir Starmer vowed to bring change to Britain as its next prime minister after his Labour Party surged to a comprehensive win in a national election on Friday, ending 14 years of often tumultuous Conservative government.

In early Friday trade, sterling was up 0.1% at $1.2777 and steady against the euro at around 84.72 pence . Stock futures pointed to a positive open for London's blue-chip stock index.

Markets have been priced for a Labour government with a strong majority in parliament supporting its centre-left policies and focus was shifting to the challenges ahead.

COMMENTS:

BEN NABARRO, CHIEF UK ECONOMIST CITIGROUP, LONDON:

"The landslide victory for Labour implied by the exit polls is likely to surprise no one. With almost no uncertainty premium priced into the market, there is nothing to price out. Instead, gilts will be waiting to see if there are any first week policy surprises, but it seems unlikely that the new government will want to give any impression of fiscal shortcuts."

"More likely, the focus will likely be on preparations for an austere fiscal event in the autumn that emphasizes the challenges ahead. In terms of this year's gilt borrowing needs, there is nothing in the manifesto to suggest an immediate change."

PAUL DALES, CHIEF UK ECONOMIST, CAPITAL ECONOMICS, LONDON:

"The big shift in the political landscape that has delivered the first Labour government since May 2010 is unlikely to lead to anything like as big a shift in the economic landscape."

"But at the margin, the policies of the new Labour government generate some upsides to our GDP, inflation and interest rate forecasts. The stability of the pound overnight is no surprise as a Labour win was already priced into the markets."

CATHAL KENNEDY, SENIOR UK ECONOMIST, RBC CAPITAL MARKETS, LONDON:

"A watchword of the incoming government is 'stability' both in terms of politics and policy making. That extends to the Bank of England, where the manifesto commits labour to preserving the BoE's independence and 2% inflation target."

"Rachel Reeves, expected to be appointed Chancellor of the Exchequer in the new government, has downplayed the prospects for an immediate post-election fiscal event. Pointedly, she has said that with the advent of the Office of Budget Responsibility (OBR) means that the state of the UK's public finances is now more transparent.

So it doesn't appear as if there'll be an 'opening of the books' emergency budget straight after the election.

LINDSAY JAMES, INVESTMENT STRATEGIST, QUILTER INVESTORS, LONDON:

"With markets having had the best part of three years to get comfortable with the idea of a Labour government, little reaction is to be expected in the near term.

With political turmoil hitting other developed economies at the same time, this huge majority may present the UK to investors as somewhat of a political safe haven – a known quantity that should give businesses confidence in the environment they operate in.

But looming over all of this is the economic backdrop. This election might be remembered as one where, chastened by the impact of the Truss/Kwarteng budget, the average politician became vastly more conscious of the fiscal deficit, the debt to GDP ratio and the ultimate fragility of the gilt market. Whilst likely to act as a break on future borrowing, it also makes their job of delivery an awful lot harder as a result."

MICHAEL BROWN, SENIOR RESEARCH ANALYST, PEPPERSTONE, LONDON:

"The result was bang in line with what markets priced six weeks ago, right at start the start of the campaign. So, no surprise that cable is flat as a pancake. First thing, it is only an exit poll. They are usually very, very accurate here in the UK but there is a margin of error. So we'll have to watch those results as they come in throughout the night.

"There is a lot of spending that (Labour) have pledged as well and only 20 billion pounds' worth of fiscal headroom – give or take – so how those book are going to be balanced is a key question.

And this plan for growth, 2.5% annual GDP growth is punchy, if I'm being kind, kind of fanciful if I'm being slightly less kind and if we don't get that growth relatively quickly, you could be looking at a pretty significant fiscal tightening going on."

FRANCESCO PESOLE, CURRENCY STRATEGIST, ING, LONDON:

"The projection was a bit lower than expected for seats won by Labour, and the Conservatives did a bit better than expected.

"The reaction in markets is showing us that this doesn't really matter and sterling hasn't really moved. That shows markets were pricing in a landslide Labour victory."

"The plan for Labour to not raise taxes and try and grow the economy is very optimistic."

CHRIS BEAUCHAMP, CHIEF MARKET ANALYST, IG, LONDON:

"The exit poll has provoked little volatility in FX markets, as the expected Labour landslide is duly predicted. The stability that would be provided by such a win would mean investors can cross 'UK political risk' off their list of worries for the time being. While there is a long night ahead of us, the focus now shifts across the channel to France, where Sunday night's election could have bigger ramifications."

FIONA CINCOTTA, SENIOR MARKETS ANALYST, CITY INDEX, LONDON:

"There were no nasty surprises – no surprises, full stop in fact. So everything as expected, everything has been priced in."

"What's going to be really interesting – and we've been speaking about it a lot coming into these elections – is there isn't actually that much headroom for dramatic change in fiscal policy. So, the Bank of England are going to be sleeping easy for the time being."

KENNETH BROUX, HEAD OF CORPORATE RESEARCH FX AND RATES, SOCIETE GENERALE, LONDON:

"It looks like a landslide victory, but the projected majority is at the lower end of the range expected."

"We know Labour were going to win, so this doesn't change much and this isn't a game-changer for sterling. We now want to know what Labour's plans are."

"Investors have been long sterling and sentiment has been good and the results won't change that."

COLIN ASHER, SENIOR ECONOMIST, MIZUHO, LONDON:

"Labour has marginally underperformed versus some of the latest polls, but nonetheless have a huge majority. If you had offered them this result 6m ago – they would have bitten your hand off."

"Unsurprisingly, sterling was almost unmoved by the exit poll.

"Alas, thrashing this government at the polls is the easy part. Now the hard works starts. Expectations will be high and the funds to meet those expectations are limited."

CHRIS SCICLUNA, HEAD OF ECONOMIC RESEARCH, DAIWA CAPITAL MARKETS, LONDON:

"The exit poll in line with expectations.

"A landslide for Labour means everything in the manifesto will be delivered. There are question marks around which taxes will raised to fund what is likely to be higher spending needs because the existing public sector projections are not particularly realistic for the current state of public services."