Andy Burnham seems all but certain to become the UK’s next Prime Minister, but what does that mean for stocks? In particular, which names have the most to lose?
The answer might not be what you think. In certain industries, short-term pressure might create long-term opportunities.
Who are the obvious casualties?
The stock market is already anticipating a Burnham era. And the Makerfield MP’s time as Greater Manchester mayor gives them some ideas.
The obvious casualties are likely to be infrastructure names. Transport operators and utilities companies — such as Pennon and SSE should be on notice.
Burnham had success with similar regional policies in Manchester, where buses have been brought under local control. So investors naturally expect something similar on a larger scale.
The more interesting story, however, might not be in infrastructure. I think it might be in housing.
A landlord’s nightmare – or is it?
Burnham openly supports rent controls. That’s on top of the Renters’ Rights Act, which came in earlier this year.
Again, a look at Manchester is instructive. Greater Manchester reported a 43% rise in financial penalties against landlords, totalling £1.47m.
Burnham also backed compulsory purchase powers for properties falling below standards. All of this sounds like a landlord’s nightmare.
To some extent, it is. But the effects of a tougher environment are unlikely to be felt evenly across the industry.
Don’t waste a good crisis
When the going gets tough, it’s the marginal operator who gets going. Higher compliance costs affect the weakest names the most.
By contrast, the strongest get stronger by comparison. The landlords who leave the industry are mostly the more financially stretched ones.
Those staying tend to be more professional and better capitalised. And amateur buy-to-let investors selling up reduces the competition for the ones left standing.
Demand for rented homes isn’t going away. So a company in a strong position in this industry might well be worth a look.
Size matters
Grainger (LSE:GRI) is the UK’s largest listed provider of private rental homes. It has a portfolio of 11,100 homes and around 5,000 more on the way.
In 2025, net rental income grew 12% to £123.6m, earnings increased by 12%, and occupancy levels were around 98.1%. That’s all pretty good – and there’s more.
Customer affordability sits at 28% of income. This suggests a low risk of defaults and scope for future increases.
Converting to a real estate investment trust (REIT) is set to save around £15m in taxes. That’s all very positive, so what’s the concern?
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What are the risks?
Regulation is a genuine risk for Grainger and it’s too close to ignore. Realistically, it comes in two forms – tighter standards and rent controls.
On the first issue, 96% of the firm’s portfolio has an EPC rating of C or above. That gives it a head start on standards tightening in the future.
In the case of rent controls, there’s not much the firm can do. But I do think this would help Grainger’s competitive position.
The company’s platform manages a growing portfolio at a marginal cost that smaller operators simply can’t replicate. And that’s a huge advantage.
The bottom line
The analyst consensus target for Grainger is 220p. The current share price is around 33% lower.
Short-term political pressure can create long-term buying opportunities in the stock market. I think this is one to keep an eye on.
Should you invest £5,000 in Grainger Plc right now?
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Stephen Wright does not own shares in any of the companies mentioned.
