Stock markets and the pound rose sharply on Friday after Boris Johnson’s Conservatives secured a resounding general election win.
Sterling jumped 2.1 per cent to $1.34 and hit €1.20 against the euro, its highest level against the single currency since the immediate aftermath of the Brexit referendum.
Companies have held off investment since the June 2016 referendum as the UK remained in political and economic turmoil over its future relationship with the EU.
While Mr Johnson’s government still has to negotiate a trade deal with the EU, investors interpreted his comfortable election victory as one that will bring stability.
The stronger pound particularly helped housebuilders, which will see rising revenues and falling costs because they generate sales in the UK and buy raw materials overseas.
Persimmon soared 12.9 per cent, while Barratt Homes, Crest Nicholson, Taylor Wimpey, Redrow and Bellway also rose.
On the FTSE 100, utility companies made strong gains after fears of nationalisation under a Labour government evaporated. SSE rose 9.5 per cent and Centrica was up 7.7 per cent.
Travel firms also performed strongly. “A perky pound means it is cheaper to travel abroad than would have otherwise been the case, something which could benefit tour operators and travel agents,” said Russ Mould, investment director at AJ Bell.
“This is not to say that all of the challenges which face these sectors or their constituents will immediately melt away.”
Craig Erlam, senior market analyst at OANDA Europe, said: “It doesn’t take a genius to guess which companies are flying this morning after that election result.
“Remove the threat of nationalisation and investors quickly flock back to the BTs, Royal Mails and National Grids of the world. And there’s plenty more. Investors in these companies will be breathing a huge sigh of relief this morning.”
Domestically focused banks including Barclays, Lloyds and Royal Bank of Scotland jumped. Exporters, which generate revenues in foreign currencies, have fared less well.
The wider economy still faces a series of problems, with growth expected to come in at just 1.3 per cent this year – its weakest level since 2009.
Businesses could face a new cliff edge at the end of next year when Mr Johnson has promised to have completed a trade deal with the EU or leave without one.
The prospect of another Brexit deadline is likely to limit any boost to investment resulting from Mr Johnson’s withdrawal agreement, said Howard Archer, chief economic advisor to the EY Item club.
“In addition, we suspect that a difficult global economic and trading environment will also weigh down on business investment in 2020 as well as hampering UK exports.”