- Historically, Labour governments have delivered better annual returns
- The premierships of Harold Wilson and Jim Callaghan were the most lucrative
Investors will be wondering what the future holds now that Labour is in power.
Looking again at the historical data, we see that Labour has generally achieved positive results when in power.
The FTSE 250 rose as much as 1.7 percent on Friday morning as news of the new government broke, but most of the gains had disappeared by afternoon.
New leader: Keir Starmer has promised change as he replaces Rishi Sunak as new PM
According to analysis by InvestEngine, Labour governments have historically delivered market returns more than twice those of the Conservatives.
That’s based on 18 years of Labour government, compared with 36 years for the Tories.
Andrew Prosser, head of investments 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 Tories.
‘Of the 13 prime ministers we’ve had since 1970, only four have been Labour prime ministers, compared to nine Conservatives. But in terms of annual results, the two best performing prime ministers have been Labour.’
Harold Wilson’s 1974-76 prime ministerial term was the most lucrative in terms of annual returns, with an average return of 20 percent per year.
Jim Callaghan’s premiership meanwhile also earned him an annual return of 20 percent.
While Margaret Thatcher and John Major each achieved returns of 488 percent and 159 percent during their premierships, this equates to annual returns of 17 percent and 16 percent respectively.
Tony Blair is also in the middle of the pack with an annual return of just seven percent, despite a total return of 92 percent.
David Cameron had some success with a nine percent return when he was in coalition with Nick Clegg, but this fell to just one percent during his solo premiership.
The data below is based on MSCI UK net total returns in GBP between June 1970 and July 2024. This measures the performance of large and mid-market segments in the United Kingdom.
| Prime Minister | Years in office | Party | Total return over the term | Annual return |
|---|---|---|---|---|
| Harold Wilson | 1974-1976 | Work | 47% | 20% |
| Jim Callaghan | 1976-1979 | Work | 74% | 20% |
| Margaret Thatcher | 1979-1990 | Conservative | 488% | 17% |
| Jan Major | 1990-1997 | Conservative | 159% | 16% |
| Rishi Sunak | 2022-2024 | Conservative | 24% | 13% |
| David Cameron/Nick Clegg | 2010-2015 | Conservative/Lib Dem | 54% | 9% |
| Theresa Mei | 2016-2019 | Conservative | 26% | 8% |
| Tony Blair | 1997-2007 | Work | 92% | 7% |
| Edward Heide | 1970-1974 | Conservative | 26% | 6% |
| Boris Johnson | 2019-2022 | Conservative | 10% | 3% |
| David Cameron | 2015-2016 | Conservative | 1% | 1% |
| Gordon Brown | 2007-2010 | Work | -9% | -3% |
| Liz Truss | 2022-2022 | Conservative | -4% | -25% |
| Source: InvestEngine | ||||
While Gordon Brown’s premiership delivered the worst total return, at -9 percent, this equates to a negative annual return of three percent.
While Liz Truss achieved a better total return during her term, her short time in Downing Street meant her premiership delivered a negative 25 per cent annualised return.
“It is perhaps no surprise that Liz Truss, with an annual return of -25 per cent, is the bottom of her historically short 50-day premiership,” said Prosser.
What does this mean for Keir Starmer’s premiership?
Given the length of time the Conservatives have been in power, they would have cumulatively delivered better returns, according to InvestEngine.
Therefore, the report says, it is most effective to prioritize a buy-and-hold strategy, rather than being guided by political changes.
‘Despite the fact that annual returns are lower under the Conservatives, £100 would have grown to £4,902 under Tory governments, but only to £447 under Labour, simply because they have been in power longer,’ Prosser said.
‘However, if investors had held that £100 in all political regimes, that same £100 would be worth £21,893 today.’
“For any investor, time is the greatest asset you can have; 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 in the markets, investors will likely continue to hope that history will repeat itself.