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Share Name Share Symbol Market Type Share ISIN Share Description
Sse Plc LSE:SSE London Ordinary Share GB0007908733 ORD 50P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -40.50 -2.42% 1,634.50 1,632.00 1,633.00 1,686.00 1,632.00 1,684.00 6,184,626 16:35:07
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Electricity 6,826.4 2,516.4 218.7 7.5 17,053

U.K. Companies Boosted by Election Results

08/05/2015 3:55pm

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By Peter Evans 

LONDON--A surprisingly strong showing by the Conservatives in the U.K.'s national election spurred a sharp rally in stock markets early Friday, as British companies and their shareholders embraced the prospect of a Tory win.

Industries as diverse as retail, defense, shipping, gambling and tobacco all rose strongly in London trading as businesses prepared for five more years of a Conservative-led government. The FTSE 100 index surged 1.8%, with the Stoxx Europe 600, Germany's DAX and France's CAC 40 also showing strong gains.

The biggest winners were businesses faced with the threat of new policies under a Labour government. Foxtons Group PLC, the upmarket London real estate agency, climbed as much 10% on news that Labour plans for a tax on homes worth more than GBP2 million ($3.04 million)--known as the mansion tax--wouldn't be implemented.

Likewise, tobacco manufacturers and gambling companies--both the subjects of proposed Labour restrictions--rose strongly.

Shares in U.K. utilities Centrica PLC and SSE PLC soared on news of a Conservative victory. Power companies had been under threat for two years by a pledge from Labour leader Ed Miliband to cap energy prices. Centrica rose almost 10%, while SSE PLC was up 6%.

But the honeymoon period for U.K. companies may be a short one as a new political uncertainty looms, centered on an age-old British debate: its relationship with Europe.

David Cameron--who is almost certain to remain British prime minister--has promised to renegotiate the terms of the U.K.'s membership in the European Union and has guaranteed an in-out referendum by 2017, despite his support for continued membership. The levels of uncertainty surrounding a potential EU exit--or "Brexit"--would far dwarf the fears felt by British business leaders in the run up to the Scottish independence referendum last year.

Analysts said the sheen of the Conservative victory could soon wear off as politicians and company executives turn to the prospect of a battle over the U.K.'s place in Europe.

"This does now open the U.K. to a period of uncertainty in the run-up to any vote," said David Tinsley, an economist at UBS. "It is certainly possible this negativity impacts investment decisions, inward investment and the broader demand for assets over the next few years."

Already, companies with big European operations were shrugging off some of the election gains. Consumer-products giant Unilever PLC, which makes around 17% of its sales in the EU, was broadly flat. Rival Reckitt Benckiser Group PLC, with around 22% of sales in the EU, also lagged behind the broader market.

Diageo PLC, which relies on trade agreements to export its whiskey, vodka and rum brands throughout the EU, showed only meager gains. "We strongly believe we would like to see the U.K. in the EU--our industry benefits from it enormously," Diageo Chief Executive Ivan Menezes said in an interview last year with The Wall Street Journal.

Diageo, the world's biggest producer of Scotch whisky, is also likely to be affected by the swift rise of the separatist Scottish National Party, which may force any new government to rework Scotland's relationship with the rest of the U.K.

But such worries appeared a long way off for most companies on Friday.

Tesco PLC and J Sainsbury PLC both got big lifts on the Conservative victory. The Labour Party had pledged to push through a rise in the minimum wage to GBP8 an hour from GBP6.50, which could have pressured margins at retailers.

"Anything that helps with employment costs is good for us," said Sainsbury CEO Mike Coupe at a meeting with reporters earlier this week.

Stocks in defense-equipment makers were among the biggest winners, with shares in BAE Systems PLC, the country's largest arms maker, rising as much as 4%. Uncertainty over the election outcome weighed on share prices in the run-up to the polls.

The Conservative Party has promised to back the construction of four new submarines to carry the country's nuclear weapons. BAE Systems, Rolls-Royce Holdings PLC and Babcock International Group PLC are among the companies already working on the submarine's design, though a decision on whether the proceed with the project isn't due until next year. Buying four new submarines would cost up to GBP16.4 billion, according to a parliamentary report.

The U.K.'s shipping industry also looked like a big winner. Mr. Cameron is widely expected to maintain the so-called nondomicile tax rule that allows wealthy shipowners and others to limit the tax paid in the U.K. Labour had promised to scrap the rule. Industry experts say one in three owners relocated outside the U.K. in the wake of tightening of nondom benefits in 2008 and 2011.

Write to Peter Evans at peter.evans@wsj.com

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