US administration nominations and the UK budget
Following Donald Trump’s election win, Matt Hickman outlines the prospective appointments and their implications and provides an update on the UK Budget policies, to date, and their possible implications.
The US election and Donald Trump’s key nominations
Against a polarised political backdrop, Trump won a “trifecta" of the House (214D:220R), Senate (47D:53R) and the White House making it easier to execute his policies. Despite this, he has tried to use a constitutional power, recess appointments, to bypass Senate appointment approval to appoint earlier and has already suffered a change to his attorney general appointment.
At a high-level, Trump's America-First agenda seeks to lower taxes; decrease regulation; regulate big tech and the media’s fairness; increase government efficiency; increase tariffs; harden immigration rules; diminish environmental protections; harden messaging towards the United Nations and further pivot towards China as an antagonist.
Susie Wiles, Chief of Staff, may have difficulties, firstly with the Republican party having appointed John Thune as Senate majority leader and reappointed Mike Johnson as house majority leader. Secondly, the administration will need a three fifths majority (60 votes) to pass Senate bills and bypass a filibuster. Thirdly, he has two years to take advantage of his trifecta ahead of the mid-terms.
So, who are the key nominations (6 December) and what are their priorities?
Treasury and commerce
Treasury secretary appointee, Scott Bessent, is seen as a safe pick bridging free-market conservatism and Trump's populism to strengthen the US’s position as the world’s leading economy and maintain the US dollar as the reserve currency of the world. His policies seek to curb federal debt, increase innovation and entrepreneurialism, maintain the US as an attractive capital hub, decrease taxes and banking regulation and use trade tariffs as a bargaining tool.
The transfer of trade and tariff responsibilities to Howard Lutnick, commerce secretary appointee, may suggest Bessent’s views were not staunch enough or that the roles’ prominence is higher. The National Institute of Economic and Social Research (NIESR) estimated 20% tariffs on the UK would reduce UK growth by 0.7 and 0.5 percentage points in the first two years primarily across automotive, aerospace, chemicals, pharmaceuticals, and machinery. At the same time baseline inflation and interest rates would increase. The importance of EU trade would increase as might the risk of another UK fiscal event.
The outcome of a US-UK trade deal may depend upon Robert Lighthizer who might be a late appointment as trade representative with hardline policies on lowered import regulations (e.g. chicken) and access to the NHS. A US-EU trade deal would depend on deregulation and decreased EU disunification.
Big-Tech and Media
The nomination of Brennan Carr for chair of the Federal Communications Commission (FCC) is notable given his policies to decrease regulation and contentious strategy to seek congress approval to expand its mandate and budget to regulate Big tech freedoms; ensure broadcasters are balanced and operate in the public interest (economy, security and law); punish TV networks for political bias; roll back net neutrality rules and reverse immunity provisions for websites and social media companies for content posted by users.
Foreign policy
Marco Rubio as Secretary of State nominee would balance a protectionist and proactive approach, notably towards China, Iran and Cuba. Additionally, he would likely maintain pressure on NATO members to increase defence spending towards 3 per cent and use UN ambassador nominee, Elise Stefanik, to increase the US’s influence at the United Nations.
Defence
The Senate approval of Peter Hegseth as Secretary of Defence is looking increasingly unlikely with Adam Smith, the ranking Democrat on the House Armed Services Committee saying, "There is reason for concern that this is not a person who is a serious enough policymaker, serious enough policy implementer, to do a successful job,". His replacement may be Ron DeSantis, who served in the US Navy as a military lawyer in 2004 at the Guantanamo Bay detention centre, Cuba, and in Iraq where US military rules of engagement was framed by his legal judgments.
Trump's policies would include the continuation of US support for Ukraine being predicated on precarious negotiations, pushing Nato allies to increase defence spending towards 3% with their focus on Russia, with the US concentrating more on China, improved efficiency and the removal of progressive diversity policies.
Energy
Chris Wright, Energy secretary Nomination, is founder and CEO of Liberty Energy and in 2019 stated there is “no climate crisis” suggesting a strong focus on oil and gas production, nuclear power, wind and solar. Whilst clean power is expected to lose support, some republicans are suggesting the Inflation Reduction Act, which promotes clean energy, could remain.
UK Budget – The policies and possible implications
The need for a long-term strategy enabling growth through reform, funding and trade has increased against the backdrop at home of anaemic economic growth, volatile inflation, high debt levels and Brexit implementation. This is in addition to support for Ukraine, increasing far-right support in Europe and a protectionist Trump administration.
Rachel Reeves sought to allay fears with increased spending, tax and borrowing to “begin a decade of national renewal and fix the foundations of the UK economy”. A 31 October 2024 YouGov poll suggests only 20% of people believe they will be better off, 38% worse off combined with 42% seeing changes as unaffordable and clarity from strategic reviews not forthcoming until June 2025 - a delay from the spring. The wait for industry and the electorate will increase pressure on the government causing increased speculation. Further tax rises have not been ruled out by Kier Starmer despite a YouGov poll also showing Labour as the least popular of major parties and a parliamentary petition gaining 2.6 million votes for a new general election given broken manifesto promises.
So, what are the current themes (6 December) and possible outcomes of the budget?
Regulatory change
The Competition and Markets Authority review next year will explore approving more mergers and acquisitions without forcing asset sales and instead use behavioural remedies following criticism of the regulators prior approach. This may mean the merger between Vodafone and Three UK is approved with investment and social tariffs commitments.
Nikhil Rathi, Head of the FCA, suggested earlier in 2024 that the UK redress system was more complex and claims management activity was higher than European peers. The next five years will be an important balancing act for regulators between growth and consumer interests.
The new listing rules introduced at the end of July 2024 were intended to bring London in-line with major listing venues notably in the US and EU such as dual class share structures, merging listing categories, adjusting sponsor requirements, changing related party transaction rules and decreased information requirements for significant transactions.
These changes and the inheritance tax increase further decrease AIM’s attractiveness for both companies and investors. Additionally, the establishment in May 2025 of a private company share trading venue, Private Intermittent Securities and Capital Exchange System, PISCES, fewer listings and over 90 companies having delisted from AIM in 2024 may end in further listing category simplification.
Wages and operating budget increases
Prior to the budget the government agreed wage increases for teachers, NHS junior doctors and nurses and train drivers that the institute for fiscal studies assessed would cost an additional £9.4bn (Total £11.6bn) in 2024-25. In return, information is starting to be disseminated with targets and controversial league tables (Blair government experiencing mixed results) introduced.
In addition, the National Living Wage (NLW) increased for employees aged 21 and over to £12.21 per hour primarily affecting the retail, hospitality, support service and care sectors and being negatively received given the economic backdrop.
The construction and support services sectors may be in high demand if the NHS cannot fulfil the delivery of 40,000 elective appointments per week (£22.6bn over 2 years) and the Education sector deliver value for money following a £4bn (£2.3bn for core schools’ budget) increased operating spend.
Taxes
Employer national insurance was increased to 15% from April 2025 and the secondary threshold was lowered meaning employer payments on employee’s earnings starting from £5,000 (current £9,100). The feedback from the Office for Budget Responsibility and industry is higher unemployment and lower economic growth. Additionally, Labour increased the Energy profits Levy on Oil and Gas companies by 3% (to 38%) remaining until 31 March 2030.
UK Pension reform
Firstly, the pooling of all local government pension assets was to be completed with a percentage earmarked for UK infrastructure growth. Secondly, funds may be required to invest more in UK listed equities following a government review which suggested that some funds had diversified geographically and were underweight when compared to Canada, New Zealand and Australia. Thirdly, that further diversification towards private markets might improve risk-adjusted returns.
Capital Investment
“Invest 2035” is the UK governments 10-year infrastructure plan to be announced in June 2025 and will overseen by the new National Infrastructure and Service Transformation Authority (NISTA). The plan prioritises public-private partnerships across Advanced manufacturing, Clean Energy, Creative Industries, Defence, Digital and Technologies, Financial Services, Life Sciences and Professional and Business Services sectors with GDP estimated by the Office for Budget Responsibility (OBR) to increase by 1.4% in the longer term and notably contribute towards decreasing emissions by 81% by 2035. In order to unlock £100bn to be invested over the 5 years from October 2024, the government adjusted two fiscal rules which must be met by 2029-30 and every third year of a rolling five-year forecast period. The stability rule where the government uses taxation (£40bn) to meet day-to-day spending whilst only borrowing for investment and the Investment rule to reduce net debt as a proportion of GDP. This rule recognises infrastructure as generating future returns, not only debt.
A key element is the National Wealth Fund (NWF) which will partner private and initial public capital totaling £27.8bn (£5.8bn for green hydrogen, carbon capture, ports, gigafactories and green steel) with over £70bn of private money. The NWF will manage the investment activity of Great British Energy (GBE) which will receive £100 million in 2025 and 2026 for clean energy technology and capital projects. Additionally, Carbon capture, Usage and Storage and hydrogen will receive funding of up to £21.7bn over 25 years to make the UK a scaled sector leader bridging the gap to net-zero. This includes £3.9bn allocated to HyNet North-West and the East-Coast Cluster projects in 2025 and 2026. Alongside this, support for the first round of electrolytic hydrogen production contracts and extending the sustainable aviation 'Advanced Fuels Fund' for a further year.
Further investment was allocated or is envisaged to be allocated to major areas such as Automotive and electric vehicles and charge points, nuclear development, full gigabit coverage by 2030, low-carbon homes programme, road maintenance and 500 schools by the end of the decade. Additionally, the government reversed the prohibition of onshore wind in England whilst also approving the TransPennine Route upgrade and that High Speed 2 will terminate at Euston.
What might this mean for Investor Relations teams?
It is important to take stock and assess how stakeholders’ needs and a company’s positioning (business model, strategic priorities, financial and operational developments) might have changed and whether that requires further understanding and an adjusted approach for both the company and IR. The relationships within the business, competitor and other stakeholder comments alongside effective internal processes and IR’s understanding are paramount in enabling a positive, clear, consistent and well-informed discussion with audiences in periods of significant change.
This clarity and consistency are also important across the different verticals audiences receive information, such as in-person, a website which is interactive and relatable using AI to make asking questions easier and collateral which is easily accessible, informative and simple.
Whilst IR’s contribution can, at times, be difficult to assess tangibly, because of the noise in industry and markets, it can be easily assessed when interacting with the audience – hearing their feedback, tone, knowing their experiences and engaging whilst also providing them with what they need in order to make an investment decision.
Matthew Hickman is former Head of Investor Relations at Virgin Media O2
matthewhickma6@hotmail.com
Published 11 December, 2024