Blain’s Morning Porridge Sept 12^th 2025 – How will markets price a Reform Govt in the UK?

 “Britain needs Reform – but is it that one…”

The assassination of Charlie Kirk in the USA is a stark warning of rabid political polarisation. Here in the UK the marginalisation of the Tories, and Labour’s caution, has opened the door for Nigel Farage’s new populist Reform Party. How are markets likely to price a Reform Win in the run-up to the next UK election in 2029? To win without destabilising markets, Farage has much to do to establish its’ political credentials, competency and policy – and show that he has evolved.

The assassination of US right-wing Political personality Charlie Kirk was timed for maximum effect – right before 9/11. It has triggered yet another judder moment after Trump accused The Radical Left of the Murder. Wow. No proof. UK podcaster Alastair Campbell summed up the social media hate-storm that followed: “Hearing some of the reactions from Trump, Musk and others, it’s hard to avoid the conclusion they either want a civil war, or have literally no regard for the consequences of their words and actions.”

If someone was trying to stir up, incite and divide the USA, they could not have planned it better. As Charlie Kirk is elevated into a hallowed martyr by the angry American right, political polarisation is hardening.

Here in the UK there is certainly division and concern in politics, but nothing like what we perceive in the US. Our politicians remain insultingly polite to each other. Civil War is not on the menu here in Blighty. But change is. Finally the two-party mould is broken.

I’ve been very blunt in my assessments of how Donald Trump is doing as US president – thus I should not have been surprised when one of my clients asked me yesterday how I think Nigel Farage will do as Prime Minster of the UK – as the polls overwhelmingly suggest – and what the implications of markets might be?

How well Farage will cope in power is a very good question. It would be easy to damn him, but…. maybe there is something in a radical overhaul of UK politics. Let me try to be objective.

I’ve met Nigel Farage a number of times. He’s the kind of bloke who will talk to you whether you’re a lefty, LBGTQ or whatever. His argumentative reasonableness is one secret of his common-man success. He is likeable although I disagree with him. I have supped beer with him. Enjoyed it. But is he the leader the UK needs?

A succession of Tories failed because some were genuinely fools, and others due to internal party division. Labour is failing because Starmer is a lawyer not a leader, and the party lacks internal discipline. There is little point in a massive majority unless the Party has the will to exercise its majority by delivering tough policies effectively.

Farage is full of bonhomie, and I fear he is too keen to be liked, and not serious enough to succeed. I might misjudge him. He also has a record of falling out with his fellow travellers – not unlike Trump. Will he be able to control a party that is likely to contain many recycled, failed Tory dinosaurs, who are bound to expect their experience gives them relevance and a seat at the table? (If I were Farage I would welcome them publically, before showing them the door.) In contrast to Labour and recent Tory govts, Trump’s success is contained in the absolute power he wields over the Republican Party.

The UK establishment would love to simply dismiss Farage, Reform and Populism as a likely disaster. The leftish commentariat is united in horror at the prospect of mass deportations and MAGA-style economic and policy disruption. But with four-years before the next UK election, who knows how Reform and Farage might evolve? The consensus is Reform is too inexperienced, too right-wing, too populist, too angry, and lacks policies and credibility in the mainstream, while still attracting to many tin-foil hat wearing anti-vaxers, crypto-shills and other outright bad-uns.

None of that means it isn’t going to happen. How Reform develops over the next 4 years is important for markets and UK assets because Politics and Financial Asset prices are closely aligned by the confidence politicians create around their actions. At stake is how Farage and Reform might impact the UK’s Virtuous Sovereign Trinity of Sterling Stability, the Sustainability of the Gilts Market, while Demonstrating Political Competency. Thus far, Liz Truss has come closest to destroying it. Can Nigel do better?

Farage is a man whose time has apparently come. Although a week is a long-time in politics, his team are already measuring up the curtains for Downing St. The polls show him winning 35% of the vote, giving Reform a substantial majority – destroying both Labour and the Conservatives. After decades spent as a niche single-topic whinger about Europe he was almost a fully-qualified “National Treasure” – dearly loved but largely irrelevant.

Since Brexit – which he played no small part in driving – Farage has repeatedly reinvented himself seeking relevancy, and has finally stumbled into wide mainstream populist political success. Although Farage was the Father of Brexit – he’s largely escaped blame for the monumental omnishambles its inflicted on the UK economy because attention-seeking Boris sidelined him. Relations with Europe, and the need for the UK to trade to thrive, is one aspect Farage will have to show an ability to change around – lest it prove his Achilles’ Heel.

A year ago I placed a bet Farage would be leading the Conservative Party into the 1929 Election. He’d done even better than that – he’s eliminated them. There is a consensus the Conservatives are finished. There are daily defections to Reform. It looks likely Farage will be leading the UK right into the next plebiscite. I guess I can try arguing I won?

As a populist, he’s become something of a British Analogue for Trump. He’s grabbed the precepts from Trump’s Maga playbook. He has identified his voter-base as similar – British citizens who feel let down, marginalised and left behind. He has given them hope their lives can be changed by telling them who to blame; the existing parties, the cabal that (allegedly) runs government and business, and immigrants. He is presenting himself and his Reform Party as the radical alternative to 80 years of indistinguishable Labour/Conservative social democratic governments which he convincingly paints as responsible for the UK stumble into decline, and the marginalisation of White British Working Class.

Lots of things are going in Farage’s favour.

The early hopes the new Labour government would swiftly improve the UK have vanished. Nobody is singing “Things can only get better” anymore. For right or wrong, Labour are struggling. They have moved too slowly and cautiously for their successes to register with the electorate. They have failed to make necessary policy calls because of lax discipline, but any policies they do enact have been immediately and decisively undermined by Blitzkrieg Political attacks – much of it overblown and designed to shock and destabilise.

They are being slaughtered in the polls because Labour has failed to manage the Media or effectively communicate with the electorate. Last week’s cabinet reshuffle simply adds to the impression of directionless dither. Under Sir Keir Starmer, they look Rabbits in the Headlights, leaving the door wide open to Reform to promise something new.

Farage has established media control. He is using Immigration to control the temperature of the political debate and hold the focus on himself. If the news starts moving against him, all he has to do is say something outrageous about stopping the boats, or repatriating asylum seekers, and the cameras immediately retrain on him.

Immigration has become his lightning rod. It finds immediate resonance with voters – especially in the middle/working classes that once trended left. As a student in the 1980’s I wore Anti-Nazi League badges and danced along to The Beat as my protest against racism. History had taught me the strength of the UK was founded in successive waves of immigration bringing new blood, skills, and ideas to the country. But after a couple of days in London last week, even I (a genetic lefty) am wondering how it became so not-British. Illegal immigration (small-boat crossings) is a tiny rounding error on total immigration, but it’s become the number one electoral issue.

Playing the immigration card is not without risk. My chum Professor Mark Blyth of Brown in the USA pointed out how Enoch Powell was the most charismatic Tory in the 1960s and 70s, but marginalised himself by overplaying the immigration card – few readers will be old enough to remember his warnings of “Rivers of Blood” if it was not capped,  According to public opinion data of the time, almost 80% of Brits agreed with Powell, but back then there was cross party and media agreement that his provocations were beyond the pale.

Not today. If Sir Keir Starmer were a genuine effective leader, rather than a diligent lawyer, he might have attacked Farage’s immigration with facts, policy and results, but he hasn’t. Farage is effectively left unchallenged, enabling and empowering increasingly racist-tinged protests, where obnoxious thugs are arrested and made into political martyrs by the courts – again backfiring against Starmer.

Farage has promised to fix the economy. That entails significant risk. He is taking his playbook from MAGA – but the USA is a very large and is a very strong internalised economy. At the time of the last election in Nov ’24 it was the fastest growing Western Economy. It was the global hegemon. It is so big and strong that even Donald Trump is finding it difficult to break.

In contrast the UK is a relatively small, crowded Island that has historically relied on Trade to drive growth and sustain the economy. It is a “fragile” economy, and has been battered by a succession of poor governments and bad decisions around Brexit. It is enormously vulnerable to even the faintest whiff of bad government or incompetent policies. To fix it will need a revolution in policies, spending, taxation and funding – areas where the small core of the new Reform Party is currently… uncrowded by expertise.

To measure the risk, you need to understand the scale of the challenge of rebuilding broken Britain. How do they intend to address flatline wages, the cost of living increases, energy costs, broken infrastructure, and the “mansplaining” by the London elites which genuinely pisses off the electorate? Labour isn’t listening, still caught up in it’s endless, going-nowhere angst over Wokery, Net Zero, Diversity Awareness, and greedy unions.

Plenty of people are listening to Farage. They want to hear more. Just like populism in Europe, outside London (and Edinburgh) there is fertile ground across the deindustrialized wastelands – just as has fueled the AfD in Germany and FN in France.

In the US, MAGA is similar, but it has money. While many folk think a US “Dark Alignment” of Tech Billionaires and Silicon Valley Financiers, (Peter Theil, et al) have captured Trump, the reality is the Carbon lobby, “Drill, Baby, Drill” offers candidates money, and voters immediate satisfaction.

There is no analogous base of wealth and power supporting Farage. His past is clouded by a succession of wealthy opportunists. Friends of Farage tell me his greatest weakness is falling for shady characters who say they can help him, but then simply exploit him. Typically, they are wealthy outsiders who’ve made their money obscurely and fall well outside the establishment. These may explain why Farage’s previous efforts to build a political party have failed. It also explains why he’s been willing to play courtier to Trump to find American sponsorship for the party.

His US fascination is a serious risk for Farage. Most Brits find Trump distasteful, less than 20% admire him, and most object to the prospect of American Money influencing UK politics.

For markets the key issue during the run-in to the next election is how competent and deliverable Reform Policies will evolve. What will Reform present that is better than the last 80 years of dithering Tory/Labour social democracy? The list is endless, but includes the following bag of Gordian Knots…

• Will trade policies marginalize Europe? That’s a surefire Gilt sell signal.
• Can they institute an effect cap on government spending inefficiency (a UK DOGE) by reforming civil service and local government bureaucracy?
• What housing policies will they pursue to give young workers security and the ability to start family formation, without collapsing the housing market?
• Will the Bank of England remain Independent?
• How will they address the UK’s broken infrastructure (largely the result of privatisation), or confront the current owners to benefit the nation rather than shareholders?
• Where will Reform find the ministers with the ability to run the state?
• Can they rescope the NHS before it consumes the whole nation – Labour is terrified to even look at it.
• Does Farage have the cojones to tell his electorate the UK can’t afford the NHS – and that in future Uk workers – his voters – must be insured or pay.
• How will they stimulate the economy by persuading global investors tax cuts will not result in chronic GILTS crisis – triggering TRUSS 2.

On top of all that, ask if Farage can establish a strong and disciplined new party within 3.5 years to win an election. His engine room is full of bodies from the old Tory central office.

The rise of Farage and Reform has happened. It is unlikely to wither ahead of the next election. While Labour may still be able to create a modicum of growth, and even some electoral satisfaction, the next election will be contested – and that means markets have to pay attention to Farage now…

Or am I missing something?

Out of time. Have a great weekend..

Bill Blain

CEO – Windshift Capital

Author – The Morning Porridge

Partner – Shard Capital