The Labour Party has returned to power in Britain after winning a historic landslide election victory. “The work of change begins immediately” said Keir Starmer upon arrival at Downing Street after accepting the King’s invitation to form a new government.

Labour won a 170-seat majority in the House of Commons as up and down the country it won seats from the Conservatives and Scottish Nationalists, though this record haul was on the basis of only 34% support.

This was not so much a story of Labour victory, however, as it was of Tory humiliation. Defeated Conservative prime minister Rishi Sunak resigned on 5 July having led his party to the worst-ever defeat in its 190-year history. The party that had been in power for the past 14 years was swept away with many commentators and pollsters arguing that Britain’s flatlining economy, prolonged underinvestment in public services and a range of political controversies during the Johnson era in particular were to blame.

Immediately after the new prime minister’s arrival in Downing Street he set about appointing his Cabinet. Angela Rayner was the first to be announced as deputy prime minister, but Rachel Reeves as chancellor is of far greater political and economic significance. David Lammy was appointed foreign secretary.

Reeves is one of the most powerful figures in Sir Keir’s inner team along with Pat McFadden, a highly influential but low-key former minister under Tony Blair and Gordon Brown. Now chancellor of the duchy of Lancaster, McFadden has been deeply involved for months in preparing to govern. Sue Gray, another key player, is a former civil servant and now the prime minister’s chief of staff, who has been in regular contact with Cabinet secretary Sir Simon Case, since the turn of the year. After the Labour leader’s missions had been fine-tuned and turned into policies, they were then made into ‘implementation plans’ for government.

Reeves made history by becoming the UK’s first female chancellor of the exchequer, bringing with her a promise of change in economic and financial policymaking at the highest level, and committed Labour to a national mission in support of growth. “Where governments have been unwilling to take the difficult decisions to deliver growth – or have waited too long to act – I will deliver. It is now a national mission. There is no time to waste.”

She wasted no time in issuing a damning assessment of the state of the UK’s finances. The new chancellor of the exchequer said she was inheriting a depleted economy from the Conservatives that would create a ‘challenge’ for the new Labour government. “There’s not a huge amount of money there,” Reeves told the BBC on 6 July. “I know the scale of the challenge I inherit.”

Reeves said she would lean on the private sector to cover the shortfall. “Private-sector investment is the lifeblood of a successful economy. We need to unlock private-sector investment” she said.

Reeves has articulated a clear objective during her years as shadow chancellor to drive economic growth by reducing reliance on public debt and instead encourage private investment. Key players in the investment world expressed their support. Paul Plewman, who heads Macquarie’s operations in Europe, the Middle East, and Africa, praised Labour’s approach as providing “a strong platform for a positive partnership with the private sector.” Blackstone’s head of European real estate, James Seppala, highlighted the UK as its primary market in Europe, noting the incoming government’s supportive stance towards inward investment as a crucial factor.

Reeves is expected to pursue an economic agenda influenced by – among others – Janet Yellen, US secretary of the treasury, whose policies are said to have encouraged job creation and a manufacturing investment boom. Yellen’s ‘modern supply-side economics’ aims to bolster economic growth by raising productivity while reducing inequality. In practice, this has meant giving companies incentives – subsidies and tax cuts – to invest in the US and generate jobs, particularly in emerging green sectors.

Reeves is also influenced by the Harvard economist Dani Rodrik, who calls for ‘productivism’, a partnership between governments and businesses to create more productive jobs throughout an economy.

The chancellor is anticipated to resist tax rises in her first budget expected in September and will set a tight one-year spending envelope for departments. The big question for Reeves is what happens in 2025? The Conservatives always claimed Labour would increase taxation and if that growth doesn’t come, Reeves may have no choice.

Former chancellor Jeremy Hunt paid tribute: “Keir Starmer and Rachel Reeves are decent people and committed public servants who have changed the Labour Party for the better. Whatever our policy differences, we all now need them to succeed.”

Rishi Sunak has apologised to the nation following the Conservative Party’s general election defeat – the worst in its parliamentary history. Accepting responsibility for the result, Sunak said he heard voters’ anger at his government.

“To the country I would like to say first and foremost I am sorry,” he said. “I have given this job my all but you have sent a clear message that the government of the UK must change, and yours is the judgement that matters.”

The Conservatives won 24% of the vote, and 121 seats, down 251 seats on 2019’s election results. Former Prime Minister Liz Truss – whose brief period in office led to a slump in support from the public – lost her Southwest Norfolk seat to Labour by 630 votes. She is among dozens of senior Tories who lost their seats, including defence secretary Grant Shapps, Commons leader Penny Mordaunt, and former leader of the house Sir Jacob Rees-Mogg.

Rishi Sunak will remain the Conservative party leader, subject to a timeframe being set by the influential backbench 1922 Committee, which will meet this week to decide who sits on its executive. It will then work out a timetable for a contest.

With Jeremy Hunt, the former chancellor, having ruled himself out as leader over the weekend of July 7/8, the leadership contest is likely to be between Kemi Badenoch, Priti Patel, and Suella Braverman as well as former home secretary James Cleverly and former security minister Tom Tugendhat.

Grant Lewis and Neville Hill of Hybrid Economics, whose mission is to help firms chart their way through economic and climate challenges towards a resilient, sustainable future, give their view to Let’s Vote on what comes next.

As the polls predicted, the Labour Party has won its majority in the UK General Election and Keir Starmer has become Prime Minister. But expectations for what this new government will be able to change are low.

The challenges the incoming government will face are well documented. In the past 15 years the UK economy has barely grown. The public finances are in dire shape, with a large deficit and massive government debt even as the tax burden stands at its highest since World War 2. Public services, meanwhile, are in desperate need of money. A series of crises – the NHS, strikes, the potential collapse of universities or water companies – all loom on the horizon as Starmer gets his feet under the desk in Number 10.

A grim inheritance indeed, and one that’s driving the low expectations for a Starmer government. But past performance is not always the best guide to the future. Ten years ago, Ireland and Greece were in absolute crisis. Today they are amongst the strongest economic performers in Europe. The UK’s dire economic performance was partly down to bad luck – the financial crisis and the pandemic – but was mainly the result of terrible policy – austerity and Brexit – and political turmoil.

There are several reasons to think that a Labour government could usher in a period of better economic performance.

First, the political turbulence we’ve lived with since 2016 – Brexit, five Prime Ministers, six Chancellors, the notorious ‘mini-budget’ – now ends! Starmer has a large majority, enormous authority over his party, and the prospect of at least two terms in office. Businesses will see – and expect – stability in politics and policy. That will make them more willing to invest and hire. But it also means that the government will be able to push through tough policies that should boost growth in the longer term.

While the Labour Party has limited its room for manoeuvre by promising not to raise Income Tax, National Insurance, and VAT rates, we expect the budget this autumn to deliver some additional money for the UK’s beleaguered public services by raising taxes on some or all of capital gains, inheritances, and pensions. It may also broaden the tax ‘base’, by extending National Insurance to investment income.

Planning reforms should ease the UK’s housing crisis – allowing more people to move to where the most productive jobs are – and allow the industries of the future to invest in gigafactories, data centres, and film studios.

Labour’s energy policy should allow for a fast build-out of wind and solar electricity generating capacity, accelerating the path to net zero but also creating the long-term prospects of cheaper, more stable energy supplies that will boost competitiveness.

And a Labour government could improve the economic relationship between the UK and the EU. Their manifesto only proposes minor changes to that, but public opinion is moving sharply in favour of a closer relationship. Rejoining the customs union and single market would be the most transformative step to boost growth in the long run. At a minimum we expect steps to be made in that direction in Labour’s first term.

So, although it’s easy to be pessimistic about the UK at the back end of 14 years of economic failure, we are much more cheerful. In the short run the economy will enjoy a tailwind from an end to the turbulent politics and poor economic policies of recent years. And in the longer-term Labour’s planning, energy and EU policies should underwrite stronger economic growth. Investors may find that UK assets offer great long-term value.

The insurance industry was quick to react to the election result. Lloyd’s chair Bruce Carnegie-Brown expects things to be more stable under the new leadership. Carnegie-Brown was quoted as saying: “Lloyd’s looks forward to partnering with the new UK government to generate growth and to build resilience into our economy”.

ABI director general Hannah Gurga stated: “We look forward to working with the Government to deliver on our mutual priorities. Our industry shares many areas of common interest with the new government, including an ambition to drive growth and competitiveness, boost household financial resilience against risks, and tackle climate change”.

Donald Trump has widened his lead over President Biden by three points. Of more immediate interest, however, is the eighty-six percent of Democrats who said they would vote for Biden in a match up against Trump in November, a Wall Street Journal poll found. That figure was down from the 93% of Democrats who said they would vote for him in February, according to the poll, which had 1,500 registered voters interviewed from 29 June through 2 July. The Wall Street Journal said the margin of error is plus or minus 2.5 percentage points for the full sample.

Biden has however narrowed Trump’s lead in crucial swing states including Arizona, Georgia, Nevada and North Carolina in spite of his debate performance, according to a new poll published on 7 July. In the new Bloomberg poll Trump holds only a three-point lead over Biden in Arizona, Nevada and North Carolina and a one-point lead over Biden in Georgia.

With opinion pollsters in the US looking at the performance of the UK polling industry and possible improvements for November’s election, Jane Frost, chief executive at the Market Research Society, said that she was “pleased to see that the polls were consistent and reporting much more responsible than has happened in the past”.

This was backed by Chris Hopkins, political research director at Savanta, who said that the UK polling industry had performed generally well while Dr Patrick English, director of political analytics at YouGov, said that the final projection in its MRP model correctly projected the Labour landslide and the collapse in the Conservative vote. “There are things in the results that we will need to build into our future work. While we foresaw Labour’s struggles in its safest seats and a potential fragmentation of its voter base coming, our model could have done better at picking up the extent of that”.