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Could these stocks plummet if Labour wins an early general election?

In a recent series of articles I discussed the likelihood that Boris Johnson will become prime minister and looked at what this could mean for financial markets.

In those aforementioned pieces I touted the possibility of an early general election should the Boris Bus force a splintering of the Tory Party, a scenario made all the more likely by the combustible Brexit issue.

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Recent polling suggests that neither the Conservatives nor Labour would seize a House of Commons majority in the event of a fresh poll, though recent research by Channel 4 News has shown that a Jeremy Corbyn-led Labour party could grab political power in the UK should it back remaining in the European Union. And the pressure is growing from inside the party for the leadership to adopt such a stance.

A big target

It’s time to keep a close eye on political developments, then, as what occurs in Westminster in the coming months could have a big impact on your investments.

The effects of a Corbyn administration on the utilities sector could be devastating, as has been much publicised in the press (and which I myself discussed in the article described at the top of the piece). But the likely nationalisation of the country’s electricity and water companies is not the only issue that stock investors need to be prepared for.

The official opposition has long criticised the way the gambling industry is regulated in the UK, for example, and has vowed to crack down on the problem of addiction here. In plans announced in September, party deputy Tom Watson indicated just how hostile the party is towards the industry by unveiling a wide raft of measures like banning gambling advertising in sport, stopping credit card betting and introducing a compulsory levy on gambling operators amounting to 1% of gross gambling yield.

Labour isn’t about to let go of the rope just yet either. In May, Watson suggested that online casinos that are found to be failing their customers should be forced to reapply for a gambling licence, a move prompted by a report from the UK Gambling Commission that showed that a third of internet operators can be considered as falling short.

And earlier this week, the deputy leader touted the introduction of a gambling watchdog to help protect vulnerable individuals and to intensify regulation of the sector.

A gamble too far?

This clearly gives London’s quoted betting giants like GVC Holdings, William Hill and Ladbrokes Coral a lot more to worry about.

These firms’ profit outlooks have already taken an almighty smack following the introduction of maximum bets on fixed-odds betting terminals this year, though this could prove to be small change compared with some of the changes potentially coming down the line and particularly so in the fast-growing online sector.

Sure, the industry’s big hitters may be expanding into new territories like the US and mainland Europe with some gusto, but the prospect of suffocating regulation in their home territories could severely compromise their ability to create big earnings growth in the years ahead. It’s time to watch Westminster closely, then, and to plan ahead — these businesses could see their share prices fall off a cliff should Labour sweep to power.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended GVC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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