Key Takeaways
- Speculation has already built up around Andy Burnham’s likely economic policies and how they might affect UK stocks.
- Investors are watching sectors including utilities, gambling, and housebuilders.
- The new prime minister has pledged to increase Britain’s social housing stock amid potential changes to taxation.
A day after Andy Burnham took the reins of the UK government, investors are watching for crucial Cabinet appointments and policy announcements for cues on what the leadership change will mean for stocks.
While concrete economic plans are yet to be announced, investors have sifted through Burnham’s previous comments to gain a read on the sectors which could gain or suffer from the former Manchester mayor’s premiership.
One of the first sectors to move has been aerospace and defense, following Burnham’s indication he will stay the previous government’s course on defense spending and support for Ukraine. The new chancellor, John Healey, previously resigned as defense secretary because he said the government was not spending enough on military capability.
BAE BAE was up 3% following Tuesday’s market open. Many questions remain about the new government’s plans for utilities, housing, and taxation, all of which stand to affect equity valuations among FTSE 100 index members.
What Nationalization Could Mean for UK Utility Stocks
Back in May, the announcement of the Makerfield by-election, which set the wheels in motion for Burnham to return to government and replace Starmer, caused a brief selloff in the utility sector.
It followed previous comments from Burnham, who has called for “stronger public control” of areas including energy, water, and transport, a theme he emphasized again in his first speech as Labour leader on July 17.
The sector is no stranger to political risk, with nationalization a feature of former Labour leader Jeremy Corbyn’s 2017 and 2019 general election campaigns. However, experts say lack of fiscal headroom is likely to prevent utilities from being brought back under direct public ownership.
“As far as we can tell, looking to actually nationalize whole sectors is not feasible from a fiscal point of view,” says Guy Thornewill, direct equities director at Canaccord Wealth.
“Trying to exert more public control is the more likely option. It would probably involve things like putting restrictions on the amount of dividends that utilities can pay out to shareholders,” he says.
“There have been complaints in the past that a lot of the private companies have come in, put a lot of debt on the utilities, paid themselves lots of dividends and not really improved the service,” adds Thornewill.
Tancrede Fulop, Morningstar equity analyst, says Burnham has “limited leeway” in renationalizing utilities, especially water companies like United Utilities.
“Primary legislation to constrain dividends would take months and face legal challenges under the Human Rights Act property protections. Any move toward public ownership would require compensation and substantial public funding,” he says.
Housebuilder Stocks: Could Burnham’s Housing Agenda Be a Tailwind?
Burnham has wasted no time in underlining his ambitions to tackle the nation’s housing shortages, promising the “largest council housebuilding program since the postwar period.”
The Labour Party’s election-winning manifesto in 2024 pledged to address the UK’s housing shortage by building 1.5 million homes by 2029.
According to the latest figures for new housing stock released by the government, 204,000 new homes were built in the 12 months up to March this year in the UK, falling behind the 300,000 a year required to meet the goal set in the manifesto.
Housebuilding stocks have been hit hard by the impact of the Iran war this year, with shares in the sector tumbling on fears of rising UK inflation and mortgage rates, and lowered affordability and consumer confidence. All five UK housebuilder stocks under Morningstar coverage trade at discounts to their fair values, with Persimmon PSN and Barratt Redrow BTRW screening as 4-star stocks.
“It’s very clear that we have a housing shortage problem in the UK, and it’s also very clear that the last three governments have not done enough to reinvigorate the housing market,” says Imran Sattar, lead manager of the Edinburgh Investment Trust EDIN.
“The supply-side dynamics have to change. To have a government that genuinely encourages building would be positive. At the moment, housebuilders are not really encouraged to build,” he adds.
An increase in homes being built could also be a boost for stocks with exposure to construction, such as Marshalls MSLH, Ibstock IBST and SigmaRoc SRC, Sattar says.
“It’s encouraging that housing appears to be a priority and the recognition that something needs to be done. But I’d like to see what actually happens before drawing any strong conclusions,” he adds.
Will a Land Value Tax Replace Stamp Duty?
Further incentives to increase buying activity could also boost the sector. Changes to stamp duty have been touted, with Burnham previously proposing to replace stamp duty with a land value tax.
“There are some things he could do [to boost incentives], such as cut stamp duty or bring back the Help to Buy, which might help at the margin. But it is hard to see housebuilding getting back to the level that we need to get to,” says Canaccord’s Thornewill.
“If those incentives are put in, it would be good for the listed homebuilders in the UK, although the market is not currently expecting that,” he says.
However, Morningstar chief European markets strategist Michael Field suggests it’s unlikely a plan to revolutionize the housebuilding process would be ready on day one, given the limited time Burnham and his team have had to prepare for office.
“That’s probably reflected in the share prices of housebuilders that we’ve seen. We haven’t seen homebuilders rally massively on the back of his appointment over the last week or so,” he says.
What Higher Taxes Could Mean for UK Gambling Stocks
Gambling stocks could also be subject to further scrutiny. In 2025 Burnham was among a group of politicians to call for greater regulation of gambling venues in response to a Guardian report, which found slot machine companies were targeting Britain’s poorest neighborhoods.
On July 1, government policy think tank The Social Market Foundation proposed hiking machine games duty from 20% to 40% on higher stakes slot machines, which it says could raise between £275 million and £458 million.
The previous government led by Keir Starmer already increased taxes on gambling. In the 2025 Autumn Budget, Rachel Reeves doubled the remote gaming duty to 40% from 21%. However, the rate for physical machines was left untouched.
“If there was an increase in tax, that would be quite negative for the listed companies in the gambling sector,” says Canaccord Wealth’s Thornewill.
Other Stock Sectors to Watch
Meanwhile, Burnham has pledged to cut business rates for pubs in a relief for the hospitality industry.
“Previously, he has mentioned cutting hospitality VAT from 20% to 10%, which would better align with European rates,” Thornewill adds. “That would be a positive for some of the pub stocks and some hospitality companies.”
Also, less imminently, a potential levy on bank profits has been suggested within the Labour Party. So far, share prices have not reflected the political risk; JP Morgan boss Jamie Dimon just warned of “adverse” consequences if the UK government intervenes in the sector. Among the listed sector winners, HSBC HSBA is up nearly 25% in the year to date, while Lloyds Banking Group LLOY is around 11% higher.
