Which financial institutions will benefit after Labour’s expected victory in tomorrow’s UK general election? Keen to refute the tax-and-spend label, Labour shadow chancellor Rachel Reeves has vowed to ‘kickstart economic growth’, highlighting financial services as one of the UK’s ‘greatest success stories’.

There’s a template for that: Tony Blair and Gordon Brown’s ‘soft touch’ approach to the City after their landslide victory in 1997. In the following decade, financial services’ contribution to GDP rose from 6.5% to 9%, expanding the UK tax base and allowing the Blair/Brown government to boost the funding of public services.

A similar approach by Reeves might start by changing the remit of the Bank of England to focus more on growth and public finances. With its regulatory shackles loosened, one bank in particular would be an immediate beneficiary: Barclays.

Investors have long been sceptical about Barclays, whose shares trade for less than half their price 20 years ago. As measured by book value ratios, shareholders prefer other UK high street banks such as Lloyds or NatWest whose profits mainly come from interest margins rather than trading or commissions.

Barclays is tightly constrained by regulatory capital requirements, which particularly impacts its investment bank. However, in order to boost growth, Labour could ease these requirements, allowing Barclays to expand its balance sheet. That would free up excess capital, offering the potential for increased shareholder distributions.

Understanding the risks