How Much Credit Does Labour Deserve For The FTSE100 Rally...

Not Really. But It’s Complicated.

The FTSE 100 has had a remarkable run since Labour took power in July 2024. The index broke 10,000 points for the first time in January 2026, delivered a 22% gain in 2025 - its best performance since 2009 - and outperformed the S&P 500 in the process. For an index regularly dismissed as a graveyard for old economy companies weighed down by banks, oil majors, and miners, that’s a striking turnaround.

Predictably, two camps immediately formed. One says Labour’s stability and economic credibility drove it. The other says the FTSE 100 has almost nothing to do with the UK domestic economy and Labour deserves precisely zero credit. The truth, as usual, is messier than either side would like.

Let’s go sector by sector and try to call it as it is.

Defence - Nothing to Do With Labour.

BAE Systems jumped 50% in 2025. Babcock more than doubled. Rolls-Royce has been a top performer for three consecutive years. The sector has been one of the most powerful engines of the entire FTSE rally.

The driver is unambiguously geopolitical: European NATO members scrambling to hit 2%+ GDP defence spending targets following Russia’s invasion of Ukraine, sustained Middle East tensions, and a US administration making increasingly pointed noises about European nations pulling their weight. BAE’s order books stretch years ahead. That’s structural, sticky, predictable revenue - and the market has priced it accordingly.

Labour’s decision in early 2025 to commit to raising UK defence spending to 2.5% of GDP contributed modestly to domestic contractor confidence. But this rally was coming regardless of who won the 2024 election. The geopolitical tailwind was already blowing hard. Credit where it’s due: Labour didn’t obstruct it. But this performance belongs to Putin, Trump’s foreign policy, and decades of underinvestment in European security finally correcting. Not Downing Street.

Verdict: Global forces. Labour a minor contributor at best.

Mining - Nothing to Do With Labour.

Gold rose by more than 60% in 2025 - its best annual performance since 1979. Fresnillo returned 364% on the year. Antofagasta nearly doubled. For investors with heavy FTSE 100 exposure, the commodity supercycle did a significant amount of the heavy lifting.

Geopolitics, higher government debt, persistent inflation, and a much weaker US dollar all reinforced gold’s status as a long-term portfolio diversifier, while China’s improving economic outlook underpinned industrial metals demand. Precious metals became the hedge of choice in a world of ballooning debt - none of which is uniquely British.

Labour had precisely nothing to do with this. Commodity prices are set globally. UK government policy is essentially irrelevant to whether gold hits $3,000 an ounce. This sector would have performed identically under a Conservative government, a coalition, or a sentient lettuce.

Verdict: Global forces entirely. Labour: zero credit, zero blame.

Financials - A Genuine Mix

Nine of the top twenty FTSE 100 performers in 2025 were in the broader financials sector. NatWest was up over 90% in 2024, then added a further 60% in 2025. Barclays added 75%. Lloyds had its best year in a generation.

The primary driver was elevated interest rates sustaining net interest margins - something the Bank of England controls, not the Treasury. Higher rates mean banks charge more on loans than they pay on deposits. That’s not a Labour policy. That’s a monetary policy cycle.

But here’s where it gets more nuanced. The Autumn Budget in October 2024 did not introduce a windfall tax on bank profits - something the sector had genuinely feared. That omission mattered. It removed a cloud hanging over bank valuations and gave investors clarity. Not an active positive, but an avoided negative - and markets respond to those too.

The broader fiscal stability Labour projected compared to the chaos of the Liz Truss era also helped sterling and gilt markets settle down, which feeds into financial sector confidence. Faint praise, but real.

Verdict: Primarily the Bank of England and the rate cycle. Labour’s decision not to punish banks was a modest but genuine positive.

Housebuilders - The One Sector Labour Actually Tried to Help. And So Far, Failed.

This is the uncomfortable one.

When Labour won in July 2024, housebuilders rallied immediately on expectations of planning reform and the flagship 1.5 million homes target. The early optimism was not unreasonable - the manifesto commitment was one of the more credible growth policies on offer from either party.

And then reality arrived.

Planning permissions hit their lowest level since 2012. London housing starts collapsed 72% in a single year - figures not seen since the Second World War. The government is tracking to miss its own target by hundreds of thousands of homes. The Planning and Infrastructure Act has been passed, but the pipeline is running dry before the reforms have had time to matter. Skills shortages, building safety regulations, high material costs, interest rates and persistent local opposition have strangled delivery.

The housebuilders that initially rallied have largely given back significant portions of those gains. Persimmon, Taylor Wimpey and Barratt are conspicuously absent from the 2025 stellar performers list. Labour wanted credit for this sector. It hasn’t earned it yet. The legislation is in place - check back in 2027 and see if delivery has finally matched ambition.

Verdict: Labour tried, genuinely. It hasn’t worked yet.

Tech

LOL!

The Structural Reality Nobody Wants to Say Out Loud

Here’s the awkward truth about attributing FTSE 100 performance to any UK government: approximately 70% of constituent revenues come from outside the UK, making the index highly sensitive to global economic conditions rather than domestic policy. The FTSE 100 is less a barometer of the British economy than it is a globally exposed index that happens to be listed in London.

The sectors that drove 2025’s outperformance - gold miners, defence contractors, global banks - are almost entirely indifferent to UK domestic policy. The index went up because commodity prices surged, geopolitical tensions turbocharged defence budgets, and interest rates stayed higher for longer. None of those are Keir Starmer’s doing.

What Labour can reasonably claim is stable macroeconomic management that didn’t spook markets - no Truss-style budget disasters, no gilt crisis, no sterling implosion. For an index this globally exposed, sometimes the best a government can do is stay out of the way. They have, mostly. And the one area where they actively chose to intervene - housebuilding - is the sector that hasn’t delivered.

The Bottom Line

The FTSE 100’s bull run is real and impressive. Labour deserves credit for providing a stable macroeconomic backdrop and not torching the conditions that allowed it. They don’t deserve credit for the commodity supercycle, NATO’s rearmament, or the Bank of England’s rate decisions.

The markets and the economy aren’t the same thing. And the FTSE 100 and the UK economy aren’t the same thing either. Both distinctions matter when assigning credit or blame.

If Labour wants a genuine market legacy, the answer is simple: fix housing. The legislation exists, the targets exist but the delivery doesn’t - not yet. That’s the one corner of this index where government policy directly moves the needle, and it’s the one corner still waiting for the promises to land.

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