The post-election bounce is real. When the vacancy volumes are analyzed by weekly totals, it is in July that the record total for the year has been posted. While this can be a function of the immediate post-election bounce, the wider economic news for the UK is broadly encouraging. The British Economy in Q1 grew by 0.7% which was the strongest expansion seen in over two years, and as a result, has beaten all forecasts. Insofar that Q2 is likely to be flat, that can be attributed to the dampening effect of the general election, hence the fact there was a jump in vacancies in July is a good sign. With that, we are forecasting Q3 to be closer to Q1 as businesses start to be able to invest with certainty. The Labour Party may not be a natural bed fellow of business, but what Kier Starmer has done is court corporations assiduously, so to ensure direct foreign investment increases.

This is against a backdrop of European malaise, where on the one hand Macron’s sudden election has resulted in political stalemate in France, while in Germany, the economic shock of the Ukraine war is manifesting in energy prices making industry significantly less productively efficient. Similarly, the USA is likely to be politically volatile right through to November, such is the contrast in vision between the two parties. Hence the UK increasingly is seen as reassuringly boring with Starmer determined to maintain discipline, even if that means removing the whip from any rebels, to send a message to the party, that unity trumps everything. How long that lasts for is an open question, but until the Conservatives have a new leader, it is unlikely Labour will have any meaningful resistance or opposition.

This political stability and clarity around certainty of policy is now translating directly into currency markets. GBP is now trading up against both the USD and EURO to approach year long record highs, which is a bonus for the Government, as it means that inflation will naturally fall as a result. Already it has dropped to 2%, which takes away one big pressure point. Nonetheless, with bumper pay rises now set to be implemented across the public sector, this is likely to lead to serious wage inflation which could lead to the underlying rate going up again. Hence it is not a surprise that the Bank of England is holding off any further rate cuts for now. For context, it is looking like a 20% pay rise for the Doctors, with the rest of the public sector getting a 5.5% increase.

The consequence of inflation busting pay rises is then productivity and the UK is lagging behind its peers in this respect. For context, the UK is 16% lower than Germany and the USA, and this failure to keep pace has real implications for GDP growth. The London School of Economics argues that this is being caused by a failure to invest in capital and skills, so if the Labour Party is serious about reversing the decline the country has seen since 2009, it is here that we should expect to see the biggest policy announcements. Assuming that happens, the hope is that we will see that directly translate into the Labour market. How Rachel Reeves looks to pay for this through combining higher borrowing or increasing taxation, is then the real question.