Hedge funds target Andy Burnham’s UK policy agenda
Hedge fund dealers have increased their bets against UK-listed stocks this year, with announced positions rising fivefold in the first half of 2026.
Now investors believe a policy offensive under new Prime Minister Andy Burnham could expand emerging opportunities in UK equities on both the long and short sides of their portfolios.
Burnham took office this week and has vowed to lead a “cost of living government” focused on tackling rising costs of living. In his opening speech on Monday, he promised a “new economic model” for Britain, including a 10-year plan to re-industrialize the country, with housing costs and utility affordability emerging as the first pillars of his agenda.
Hedge funds say a change in domestic policy could spark a flurry of long and short ideas across UK sectors. This includes doom bets against squeezed sectors and companies, and relative value trades that involve buying companies expected to benefit from Burnham’s policies while shorting weaker businesses in the same sector.
“Where we are today, there are a lot of winners and losers, which is good because we want that distribution,” said Alyx Wood, chief investment officer at Kernow Asset Management. “There’s an explosive cocktail of really interesting things happening right now. It’s moving pretty quickly.”
Public services under pressure
Short selling, a key component of many hedge fund strategies where investors bet against a stock or other security in a bid to profit from a fall in value, has returned to the UK market with a vengeance this year.
The number of UK companies declaring short positions of at least 5% of their total shares has risen to 27 in the first half of 2026, according to analysis by law firm White & Case.
This is a sharp increase from just five in the same period last year.
Vista Group.
“The UK’s leadership change is creating a degree of uncertainty and volatility on policy across key sectors including energy, utilities, transport and housebuilding,” said Patrick Sarch, White & Case’s head of UK public mergers and acquisitions.
“As a new policy platform comes together following new government appointments, policies will be proposed, markets will react and there will be a process of moderation and prioritization to determine what is possible and over what time frame. We expect to see a relatively long period of increased uncertainty around price discovery, creating additional opportunities for short selling.”
Investors say Burnham on Tuesday announced plans to eliminate the sales tax on home electricity to give “breathing room” to customers facing cost-of-living pressure, putting energy costs and utility affordability into sharper political focus.
Wood said Kernow had bad faith about UK utilities, highlighting the high leverage in individual companies, regulatory, operational and licensing pressures and the huge investment required in Britain’s water and energy infrastructure.
“Normally utilities are your safe bets in dangerous times. Utilities are probably where we’re most negative,” Wood told CNBC, citing substandard water infrastructure in the U.K., unmet consumer expectations and regulatory uncertainty that has intensified political scrutiny.
Housing policy creates winners and losers
Burnham also wants to build more social housing and on Monday pledged to end “rough sleeping” (or homeless people living on the streets) in the UK. A policy overhaul aimed at tackling Britain’s housing affordability crisis could create winners and losers in the housebuilding industry, investors say.
house builder Vista Group and construction materials company ibstock We were among the UK companies with the highest open positions in the first half, with total open positions of almost 16% and 13% respectively, White & Case research shows.
Ibstock.
Wood said Kernow pointed out that Vistry was short in stature, accumulated debt and was long-term. Berkeley Groupdescribed it as a winner due to its stronger balance sheet and better management of planning practices. like others Try GallifordThey could benefit from an increase in affordable housing construction, he added.
“Most UK housebuilders trade at absurd discounts to economic reality. Often, short-term profits comfortably exceed market capitalization,” Wood said in a recent note.
Investors followed Burnham’s lead to 10 Downing Street with some surprise, amid fears that Labor would move left and there would be a more fiscally lax approach to public spending. But his surprise choice as chancellor of the exchequer, John Healey, has gone some way to calming markets and the former defense secretary is widely seen as “safe hands”.
White & Case’s Sarch said the evolving policy environment could drive relative value opportunities across sectors.
“We expect investors to look beyond company-specific short positions and consider significant portfolio-based long-short strategies, taking both long and short positions across sectors where they believe they will benefit from and be adversely affected by the new policy agenda,” he added.
Berkeley Group.
Edgar Allen, founder and chief investment officer of High Ground Investment Management, said homebuilders – along with some other sectors such as banks – could face more taxes, but added that this possibility was already reflected in lower valuations in those sectors.
Allen said Burnham, who replaced Labor leader Keir Starmer, who resigned last month, inherited record government spending, high debts, an “unsustainable” budget deficit and stellar returns “well above anything Liz Truss was able to achieve”.
“It’s easy to understand why investor, consumer and business confidence are at their lowest levels in years,” Allen told CNBC via email.
Still, Allen noted signs of improvement in Britain, including economic growth and rising productivity that underpin what he calls “real value”.
“We expect to see more buying activity as foreign companies pay record premiums for UK shares but are still a bargain,” he added.
