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London financial market: Don't let Labour ruin it

There's a good chance the next UK government will be left-of-centre Labour, whose previous terms of office have usually ended in inflation and currency crisis. Soft-spoken Labour politicians can't allay fears - among foreign investors and City practitioners - that a change of government will trigger a market correction and more controls on the financial sector. The reason for the fears: new-look Labour's overtures to private capital are vague and non-committal. Even Labour supporters are saying it's time to put flesh on the bones. By David Shirreff

Imagine you're in Boston managing a portfolio of international equities. It's 14 months to a UK general election which the left-of-centre Labour Party will probably win. What do you do?

Nothing. It's too early to tell whether the effect of the election will be more than a blip on the political-economic map of Europe.

However, the wise Bostonian is gathering information about Britain's new-look Labour Party. This may help him or her decide if a change in government will trigger just a small correction in the UK markets or a fundamental change.

Stuart Bell, Labour spokesman on corpor-ate affairs, visited New York and Boston last October, courtesy of UK merchant bank Kleinwort Benson, and attempted to allay investors' fears. It was an opportunity for New Labour and the most important investment community in the world to meet.

Bell, a former international lawyer - tall, soft-spoken - could pass as an investor himself. But at a dinner in New York for Kleinwort's investment clients his remarks on plans for a windfall tax on the profits of British utilities "didn't go down too well", says an eyewitness. "You could see his audience taking note that the cost of capital in the UK would rise."