For more than a decade, Britain’s economy has felt like it’s been running on fumes. Low investment, flat productivity, and businesses clinging to short-term fixes instead of long-term bets. But with a Labour government under Keir Starmer and Rachel Reeves now setting the tone, the question is simple: could this finally be the moment when the UK investment landscape gets a proper reset?

Some see it as a turning point – a chance to move from economic stagnation to a new era of green growth and long-term thinking. Others fear it’s just a different flavour of government interference, with more taxes, more rules, and more risk for investors. The truth, as usual, lies somewhere in between.

The big idea: rebuild through investment

At the heart of Labour’s message is the promise of a Green Prosperity Plan – essentially a massive public push to get Britain building and innovating again.

Through the National Wealth Fund and Great British Energy, Labour wants to channel billions into clean power, batteries, hydrogen, and cleaner manufacturing. It’s a bold attempt to shake up the energy and industrial base of the UK – and it could create serious tailwinds for the renewable energy supply chain, infrastructure firms, and advanced manufacturers.

The idea is to use public money to “crowd in” private finance – giving investors more confidence to back big, risky projects that might otherwise have struggled to get off the ground.

The plan also marks a shift in fiscal philosophy. Borrowing for long-term capital projects would be treated separately from day-to-day spending, a move designed to prioritise growth over short-term budget optics.

Of course, someone has to pay for it. Labour plans to tighten up the windfall tax on oil and gas producers by removing the generous investment offsets and extending the timeframe. The result? A clear divide between winners (green tech and infrastructure) and losers (fossil fuel firms) in the next phase of Britain’s investment story.

A financial system built for growth

Labour’s tone on financial regulation is also changing. Reeves has been keen to stress that the UK needs a system that encourages growth, innovation, and capital formation – without repeating the mistakes that led to 2008.

Two ideas stand out.

1. The UK ISA and pension reform.
   The plan is to make it easier for British savings to be invested back into British companies. A proposed £5,000 “UK ISA” would reward investors for backing UK-listed shares, while pension consolidation could create a handful of large domestic funds with the scale to support infrastructure, green energy, and high-growth tech.

That could give the London Stock Exchange a much-needed shot of liquidity and confidence – particularly in the smaller and mid-sized companies that have struggled for years to attract attention.

2. Smarter regulation for innovation.
   Labour wants regulators to take a “pro-growth” stance, encouraging innovation in areas like fintech, tokenisation, and open finance. Even the banking ring-fencing rules are under review, potentially freeing up capital for lending and investment.

For the City, this all sounds like a friendly nudge rather than a threat – though the tone from Labour remains clear: profit, yes, but with purpose.

The friction point: fairness vs. finance

Where things get trickier is tax. Labour’s “fairness” agenda is popular politically, but it’s already raising eyebrows in Mayfair.

The most controversial proposal is to tax carried interest – the share of profits earned by private equity managers – as income instead of capital gains. On paper, it’s about fairness. In practice, it’s seen as a swipe at one of the UK’s most successful (and mobile) industries.

The numbers aren’t huge – around £440 million a year – but the optics matter. Critics argue that it could push high-earning fund managers and venture investors elsewhere, just as Britain is trying to rebuild its reputation as a place to do business.

Add in potential National Insurance increases for top earners, and the tension between Labour’s pro-growth message and its political need to show “economic justice” becomes clear.

What this reset could really mean

If Labour gets its way, Britain’s investment scene could look very different in a few years.

• More state-backed direction – with government capital shaping where private money flows, especially into green and digital sectors.
• More domestic investment – with pension funds and retail investors encouraged to back UK companies rather than overseas markets.
• More tension with the financial elite – as tax rises and pay scrutiny clash with London’s role as a global finance hub.

The risk is that the government overplays its hand – spooking investors before the benefits of reform take hold. The reward, if it gets the balance right, is a stronger, more self-sustaining investment economy built on long-term confidence rather than short-term speculation.

The takeaway

Political change doesn’t automatically mean economic revival. But for the first time in years, there’s a sense of direction – a plan that links public investment, green growth, and capital market reform under one umbrella.

Whether it works will come down to delivery. If Labour can keep the City onside while driving real-world investment into clean energy and innovation, Britain might finally shake off its stagnation story. If not, the “reset” could quickly turn into another missed opportunity.

Either way, the next few years will test whether politics really can reshape Britain’s investment future – or whether old habits die hard.