Labour’s Conference, Starmer’s Message & the Fragile Pound

This week in Liverpool, at the Labour Party conference, Keir Starmer took centre stage with a sharpened tone, confronting the growing threat of Reform UK and setting out a vision for “national renewal.” But beyond speeches and symbolism lies a more serious question: how will policy direction and political uncertainty impact the pound and FX markets?

Starmer framed this moment as a decisive fork in the road. He drew a contrast between his ‘vision’ of ‘unity, responsibility, and fiscal discipline’ and the populist rhetoric of Reform UK, accusing Nigel Farage’s movement of sowing division rather than solutions. He notably ruled out introducing a wealth tax, emphasising that cuts and economic decisions “will not be cost-free or easy,” and warning that unchecked promises risk undermining investor confidence.

At the same time, Labour floated changes to various fiscal commitments, hinting at possible tax adjustments or reversals of previous tax cuts to fill budget gaps.

Political Instability: Underpinning FX Risk

For currency markets, it’s not just policy, it’s perception. Sterling’s recent modest strength faces an underlying fragility because of several political stresses:

• Unpopularity and backlash: Polls suggest Labour’s support has softened, and Reform UK is gaining traction. As voters grow impatient, the risk of policy reversals or political missteps increases, which can rattle markets.

• Competing pressures: Starmer’s push to adopt more overt “patriotic” language, clamp down on immigration, invest in local regeneration, and distance Labour from past liberalism suggests a recalibrated platform. But shifting priorities mid-term can spook investors who value stability and predictability.

• Budget hole & fiscal credibility: The conference admitted a looming multi-billion-pound budget gap. If markets doubt Labour’s ability to reconcile ambition with realism, gilt yields may rise, pulling sterling down with them.

These undercurrents make sterling more vulnerable to swings. Any sign that Labour’s discipline is cracking, or that deeper fiscal stress lies ahead, can trigger sharp reactions in FX and bond markets.

What This Means for Clients & Advisers

For high net worth clients engaged in cross-border investments, property purchases, or large currency transfers, the risk is magnified. A 2-3% drop in GBP/EUR or GBP/USD may not just be noise, it can change transaction costs by tens or even hundreds of thousands. When politics become a vector of uncertainty, currency timing matters more than usual.

For corporates with foreign supply chains, import costs, or multi-currency liabilities, abrupt shifts in sterling can distort forecasts, compress margins, and force reactive hedging or emergency refinancings. If fiscal policy veers unpredictably, overseas costs get harder to manage.

For our referral partners (lawyers, accountants, real estate advisors) this is fertile territory. Most clients underestimate how much a currency move can wipe value far more than advisory or legal costs ever do. By raising the flag now, you help clients see risk they may not yet recognise:

• Encourage planning around growth trajectories and FX sensitivity

• Suggest locking in rates ahead of volatile windows

• Introduce FX discussions as a standard part of large cross-border projects or budgets

  
  

Doing so enhances your advisory value and helps clients avoid unnecessary volatility.

Strategic Moves at a Volatile Junction

Here’s what clients and advisers can consider doing now:

• Forward contracts: Lock in rates today for upcoming foreign payments or investments, reducing vulnerability to sudden moves.

• Scenario mapping: Build multiple cases (baseline, downside, upside) that reflect different political outcomes (budget surprises, policy reversals, polling shifts) and assess FX risks under each.

• Staggered execution: Where possible, structure payments or transactions in tranches to reduce exposure to timing risk.

• Watch policy signalling: Budget announcements, fiscal statements, bond issuance strategy, and BoE cues will all matter. Sometimes subtle shifts in tone trigger outsized market moves.

Sterling’s rebound may look steady, but beneath the surface, it’s operating under pressure from renewed political dynamics. Labour’s conference sharpened the narrative: the party wants to assert control, signal discipline, and draw contrasts. But in many respects, has caused more uncertainty. For clients and partners, the goal isn’t to pick winners - it’s to protect from downside and retain flexibility.