Labour and businesses need a strategy for political volatility

Labour’s 174-seat majority in the 2024 General Election seemed to signal stability, but it actually marked the latest rise in political volatility.

Keir Starmer’s focused, disciplined campaign was highly effective, turning around a historic defeat in 2019 and seeing Labour win 63% of seats from 33.8% of votes cast. They were helped by a Conservative Party that many voters wanted to punish, and by Liberal Democrat and Reform surges which disproportionately hurt the Tories.

But beneath Labour’s historic victory, it’s impossible to ignore the signs that voter volatility has reached levels not seen in Britain since the 1970s. This political volatility has festered over the last decade. It was accelerated by the EU referendum, populist takeovers of both main parties at different times, a cross-party perception that the UK is in economic and political decline, and has been evident in:

• The number of general elections we've had in the last ten years (four)
• Increasingly fragile majorities (the Conservatives lost 251 seats in 2024, even more than the 178 lost in the 1997 landslide defeat)
• Record-breaking constituency vote swings (46 constituencies in 2024 surpassed the previous record swing of 18.8% in Brent North in 1997)
• The willingness of voters to switch parties between elections
• The return of multi-party politics across the country (it was the lowest vote share for the top two parties ever at 57%, more parties winning 5%+ of the vote, and more parties winning multiple seats than ever before).

The breakneck seesaw from Boris Johnson’s 2019 landslide to Keir Starmer’s in 2024 suggests volatility is the defining characteristic of our political age. This has far-reaching implications for Labour in government and for businesses adjusting to the new political landscape.

An unsettled party

Despite Labour’s large majority, Keir Starmer’s party has vulnerabilities that suggest it may not be as stable as it seems. James Kanagasooriam, among others, called Labour’s winning coalition “another political sandcastle” that could crumble as quickly as it formed. This potential volatility creates heightened political risk for the government:

• An untested Cabinet - Sue Gray’s departure shifted blame for Labour's early missteps, but an inexperienced Cabinet has also struggled. Recent blunders, and potential tensions with 'soft left' ministers after Morgan McSweeney’s rise, suggest a reshuffle will happen sooner rather than later.
• Scorned former shadow ministers – Starmer’s ruthlessness was evident in sidelining 20+ MPs who served in his shadow cabinet but missed out on ministerial roles. Each has levers to cause trouble, especially through Select Committees.
• By-elections waiting to happen – Journalist Michael Crick estimates 20 MPs from the 2024 intake are ‘accidents waiting to happen.’ While not all will be Labour, some potential by-elections add risk for a government struggling to show success.
• Bored and parochial backbench MPs – Labour’s huge majority leaves many backbenchers are at risk of becoming disillusioned. Some, facing razor-thin margins, will need to focus on single local issues to stand a chance of re-election, while others may grow restless as the realisation of what backbench life means dawns on them.

These issues are not new to government, but they do indicate that Labour’s majority is more fragile than it first appears.

More fractured politics

The volatile 2024 General Election pointed to a more fractured British politics. The Conservatives' humiliation, the Lib Dem resurgence, the rise of Reform, Greens, and pro-Gaza independents all mean Labour will face battles on multiple fronts at the next election:

• Uncertainty about the Tory rebuild – It remains unclear what the post-leadership election Conservative Party will look like, but this could add to the volatility. Labour may be tempted to be less disciplined if they face an unserious opposition, or they may encounter a new Tory leader capable of being a thorn in the government’s side.
• Reform is a problem for Labour – Reform’s rise is the clearest sign of new political volatility. Labour found it convenient to avoid fighting Reform in 2024, but this will be harder in 2029, given Reform came second in 90 of the seats Labour won. Reform strategists will target Labour's perceived weaknesses on immigration and other issues. Starmer and McSweeney will need to gamble on whether to appeal to more socially conservative voters or maintain support among progressives.
• The Lib Dem pull – The Lib Dems’ success in attracting Tory voters in the South West helped Labour, but their pro-European stance could pull cosmopolitan liberals away from Labour over the next five years.
• Transitions in the nations – Labour's turnaround in Scotland, going from one MP in 2019 to 37 in 2024 due to the SNP’s collapse, is a stunning example of political volatility. However, a reinvigorated SNP under a dynamic leader like Kate Forbes could pose real challenges. Meanwhile, Reform finishing second in 13 Welsh seats should also worry Labour strategists.
• Green and pro-Gaza risks in urban seats – Both the Greens and pro-Gaza independents represent identity-based trends that could disrupt Labour’s urban strongholds. Ed Miliband’s climate and energy policies may have kept the Greens quiet post-election, but a potential resurgence or continued rise of pro-Gaza candidates could complicate Labour's strategy in cities.

These challenges, from socially conservative Reform voters to progressive Greens, show the complexity of the political landscape Labour must navigate.

Labour’s choices?

The volatility of the last decade means voters now have a wider range of credible choices, and parties have a narrower, more treacherous path to power. Labour’s narrative in government is currently focused on 'fixing the foundations' through fiscal prudence, attracting investment, and stimulating economic growth. However, they will need to shift this narrative towards delivering 'real' outcomes for voters: good jobs, more money in wallets, and shorter NHS waiting lists.

What does volatility mean for businesses?

Keir Starmer has made it clear that private investment and business are crucial to his growth mission. But the volatility now central to British politics means businesses must prepare for several trends leading up to the next election:

• Expect a campaigning mentality – Morgan McSweeney’s appointment reasserted the dominance of campaigners in No.10. Despite Starmer’s promise of a new type of government, expect political decision-making to be ruthless. Businesses must try align their growth models with Labour’s objectives and ensure any policy requests resonate with the government’s target voters.
• Expect to be nimble – Labour’s current narrative, focused on its five missions, will likely evolve. Expect No.10 to consolidate around the Growth mission, but businesses should plan for the possibility of multiple shifts in course.
• Expect people changes – No.10 has seen significant people changes within 100 days, and more will follow. Businesses should map out key decision-makers, build relationships widely, and anticipate further turnover as Labour responds to volatility.

Labour’s political strategy will become clearer in the coming weeks, with the Budget a major moment and Morgan McSweeney's influence shaping the No.10 machine. The Prime Minister’s team is aware of the volatile context and will be charting a course to minimise the risks ahead.

But political volatility is here to stay, and both Labour strategists and business leaders will need to adapt to the shifting political landscape in the months and years to come.