At election time, party declarations can often impact the stock market – even if the ideas have little chance of being implemented. I took it with a pinch of salt then, when Jeremy Corbyn said if his Labour party get into power at the upcoming election he would be nationalising the broadband division of BT (LSE: BT-A), offering free internet for all.
Headline grabbing though it may be, what are the chances of it actually happening?
The plan
Jeremy Corbyn is well known as an old-school labour advocate of the more left-wing branch, his position somewhat tempered by political necessity. In this era when it is perhaps hard to tell one candidate or party from the other (despite what dyed in the wool party members might believe), at least here we are seeing a very different view.
Seemingly with the best of intentions, or perhaps sceptically as a potential vote winner, Jeremy Corbyn has announced that if Labour get into power, he will be nationalising BT’s broadband divisions, notably Openreach, and offering free broadband for all.
Naturally BT’s share price took a hit on the back of the news – it could be set, after all, to lose a profitable chunk of its business – but the trouble was short lived. The truth is that as much as this kind of thing grabs headlines, it is still very unlikely to actually happen.
A lot of ifs
For Labour to be able to nationalise BT’s broadband division like this, a lot of things would need to happen. Most notably, Labour actually has to win the election. All current polling in the UK has the Conservative party ahead, so for now there is no real indication this is something we need worry about, so to speak.
Further to this, even if Labour do get into power at the election, in order to implement a policy like this, they would need a large majority to see it through Parliament. Naturally the polls would suggest this is not likely either.
Within the Labour party itself, this idea may not be as popular as it may seem. While nationalisation certainly speaks to Jeremy Corbyn’s beliefs, and perhaps a large body of the Labour party membership, the majority of Labour MPs are not necessarily of the same mind.
Nationalisation is seen by many as part of a by-gone era of the 1980s party, and more broadly in the UK population, is not likely to sit well with the majority of voters. On the other side of the aisle a Tory party in opposition would resist any such move on principle alone (both the principles of believing in private companies and believing in acting in opposition).
I believe BT has a lot going for it as an investment, most notably a number of major cost cutting efforts that are set to help its bottom line over the coming year or two. Though its dividend sees some risk, it is currently still offering a massive 8% yield.
Jeremy Corbyn may want to nationalise its broadband division, but I don’t think that is a risk we investors need to really worry about yet.
