A look at Reform UK’s rise in the local elections and the potential impact on UK markets and financial planning, by Harry Badman

Reform UK made significant gains in the recent local elections, outperforming expectations in several regions and further shifting the political conversation in Britain. While it is still too early to determine what influence the party may ultimately have on national policy, their sudden surge in popularity signals growing voter appetite for alternative approaches to issues like taxation, government spending, and the ever-contentious saga of controlled migration.

With public sentiment continuing to evolve and a general election expected by 2029, investors may be wondering how this changing political landscape could shape the economic environment, and by extension, their long-term financial planning. So, let’s get into it.

What happened in the local elections?

Reform UK, initially founded as the Brexit Party, gained ground in a number of local councils, drawing support from voters who feel disillusioned with both the Conservatives and Labour. Their messaging focuses heavily on public sector reform, lower taxation, and reducing immigration; these are themes that have historically resonated with a not insignificant portion of the electorate during periods of economic strain or political uncertainty.

Their strong polling performance has led some analysts to predict that Reform UK could split the vote in key constituencies during the next general election, or at the very least, continue to shape the political agenda.

What does this mean for the UK government?

If Reform UK’s momentum continues, it could lead to a broader reshaping of political strategy among the larger parties. We may see policy platforms shift more heavily toward fiscal conservatism, tighter controls on public spending, or renewed scrutiny of foreign trade and immigration policies.

While Reform UK is unlikely to form a government in the short term, its rising support could influence coalitions, legislative negotiations, and the way by which traditional parties approach economic reform and public sector management. All of this feeds into the wider question of how government policy will evolve, and what that could mean for investors.

What does political uncertainty mean for investors?

Political transitions and party realignments often introduce volatility into financial markets, especially when there is a high degree of uncertainty around fiscal policy. If markets begin to price in potential changes to tax structures, public spending, or regulation, investors could see short-term fluctuations in both equity and bond markets.

While it is too soon to draw conclusions about specific policy changes, here are some areas that could come under the spotlight:

  • Taxation: Proposals to reduce income or corporate tax could lift certain sectors but raise questions around public service funding or borrowing.

  • Sterling volatility: If investor confidence wavers during an unpredictable election cycle, the pound could face pressure, which may impact overseas investments or international purchasing power.

  • Infrastructure and public sector reform: Any future shift in government priorities could affect sectors like construction, healthcare, and education. Similarly, the party’s critical stance on Net Zero could affect green investments and industries.

What should investors be thinking about?

Periods of political uncertainty can be unsettling, but they also present opportunities for well-positioned investors. Diversification remains key, and maintaining a balanced portfolio can help smooth out the effects of short-term political noise.

If you’re particularly exposed to UK assets, this may be a good time to revisit your asset allocation. It is worth considering:

  • Whether your portfolio is sufficiently diversified across global markets

  • How interest rate and inflation trends might evolve under different fiscal regimes

  • The resilience of your income strategy in the face of changing tax or pension rules

Our verdict

Reform UK’s growing presence on the political stage is a sign of wider shifts in public sentiment and political alignment. While it may not immediately upend government policy, it introduces a layer of unpredictability that investors should be mindful of as the general election approaches.

For those looking to protect and grow their wealth in an increasingly complex political environment, forward planning is essential. Reviewing your investment strategy now can help ensure it is well-positioned regardless of which direction Westminster takes.

At Matthew Douglas, we provide independent financial advice tailored to your long-term goals, helping you navigate both market and political change with confidence. To speak with one of our advisers, please contact us here.