There is no doubt that the new Labour government will have an impact on a range of sectors, but to understand where this will be most significant, we need to root out potential misconceptions and be alert to the factors that risk swamping the turning of the UK political tide.
It's early into the new administration but one of the government's first moves has done little to boost the IT sector, having cancelled £1.3bn in funding earmarked for artificial intelligence (AI) and technology research. However, there should be rich pickings from IT, as highlighted in May’s paper from the Tony Blair Institute that suggested AI investment could cut government overheads by £40bn per annum ('Governing in the Age of AI: A New Model to Transform the State'). Black holes plugged, and with change to spare?
The drive to digitise the UK public sector continues – and perhaps will even accelerate – as efficiency and value for money become ever more important. Kainos (KNOS), even after a year of lowering forecasts, still shows 11 per cent compound earnings per share (EPS) growth through to March 2027 plus a yield now of more than 3 per cent. The shares have been drifting lower for the past 18 months, and today are close to their lowest equity rating (EV/Ebitda and PE) in 10 years. It feels like double-digit returns could be available here. Smaller (and less liquid, riskier) players in this space include the likes of Made Tech (MTEC) and TPXimpact (TPX).