Member Article

General Election 2017: London business leaders fear more uncertainty but glimmer of hope for softer Brexit

In yet more seismic shocks for the political establishment and the UK as a whole, businesses and business leaders woke up to a vastly more uncertain political and economic future after the assumed Conservative Party parliamentary majority failed to materialise following a bruising seven week campaign.

Another poll and another shock result as once again the majority of pollsters, YouGov and Survation notwithstanding, failed to capture the national mood and tenor of the UK population.

Theresa May looks likely to hobble on as PM, propped up by the Democratic Unionist Party in Northern Ireland, but the impact on her Brexit negotiating hand, not to mention the knock on effects for the UK economy will be considerable, after another Tory poll gamble backfired spectacularly.

In light of the ongoing drama, we’ve asked London business leaders what they make of the result and how they foresee things developing in the coming months.

Brexit

This was meant to be an election on Brexit and, while the issue was repeatedly sidelined during the campaign, the biggest political negotiation the UK has faced in over a generation has now been catapulted back to the top of the agenda.

Time and again the issue of Brexit and the impact that the Tory’s fudged majority will have on the government’s negotiating hand has dominated reaction amongst London’s businesses.

Daniel Harden, Global Reach Partners

“This snap election has not only back-fired politically for the Prime Minister, it has also resulted in more turmoil on the currency markets. The Pound fell by around two per cent against the US dollar when markets opened today. Earlier it sank to its lowest level in more than a month in Asia while stocks within UK-exposed companies were among the worst performers in that region’s markets.

“[T]he Pound is set for a rocky ride in the months ahead.”

“This is hardly the strong and stable outcome Ms May had envisaged and is a huge contrast from seven weeks ago when Sterling surged with the markets anticipating a bigger Conservative majority when the election was initially called. With Brexit talks now set to begin in earnest and Ms May saying she will hang on as Prime Minister, at least for the time being, the Pound is set for a rocky ride in the months ahead.”

Stuart Lucas, Asset Match

“Britain has just witnessed one of the most significant general elections in recent times which caps of 12 months off momentous political announcements, extending from Brexit to Theresa May’s initial appointment as Prime Minister in August 2016. So far, the UK’s blue chip share index has jumped by 1.3%, and everything at the moment seems very much like businesses as normal.

“That being said, it is important that this stability is maintained through strong leadership from Westminster. Businesses, investors and consumers will be looking to next government, in whatever form it takes, to provide the direction required to lead Britain through Brexit negotiations over the coming months. A prolonged period of political bargaining between the major political parties will not be in the interest of business Britain. “

Gerry Hughes, Chief Executive at GVA

“Today’s result is certainly not the outcome the property market had hoped for. Both parties must now act as a unified front to secure the best deal for the UK in exiting the EU, delivering much needed stability and clarity for the markets and confidence for UK and overseas investors.

“Reducing any uncertainty is crucial. A glimmer of positivity is that we may finally have greater transparency around the Brexit debates and negotiations. There is no longer any mandate for Brexit to be progressed behind closed doors.”

The markets

Just seconds after Thursday night’s exit poll the markets showed their dissatisfaction with the potential for a hung parliament as Sterling tumbled against the Pound and Dollar. However, the currency has now regained many of its losses as the initial shock of last night’s result settled in.

Commentators seem split on whether a hung parliament is bad news for a Brexit deal or that a reduced Tory majority makes a softer Brexit more likely.

Richard Flax, Moneyfarm

“There is now more uncertainty, but the markets may take comfort with the prospect of an alternative to the “hard” Brexit May has been trying to sell to Britain and the EU. Sterling could lift on the idea of a “softer” Brexit, whatever that might mean.

“Uncertainty usually brings volatility on the markets, so it’s best not to keep all your assets in one investment, or one geography. Instead, a globally diverse portfolio can help whether any UK storms. After all, the global impact of this volatility has been limited for now, so you may be able to smooth out any short-term losses with gains from elsewhere.”

EU worker rights

Colin Stanbridge, LCCI

“A hung parliament is a hugely frustrating result for businesses, only creating more uncertainty on top of the recent impact of the referendum vote, increasing costs and currency fluctuation.

“There is no time to waste in establishing a good deal for London in the Brexit negotiations and protecting the country’s economy but protecting the capital’s economy.

“A hung parliament is a hugely frustrating result for businesses”

“Pivotal to that is infrastructure investment in London as well as securing the rights of EU national in the UK as well as ensuring we have access to skills in the necessary numbers to protect our workforce.

“We must also look to equip the next generation with the skills it needs to succeed.”

Business taxation

With so much political deal-making and economic upheaval potentially ahead, the day-to-day concerns of businesses, such as business rates and corporation tax, could potentially be lost in all the confusion. A number of businesses have questioned whether the political drama will paralise government, or even see the DUP seeking Tory concessions to boost Northern Irish business.

Carl Reader, The Startup Coach

“It is likely that any co-operating party, including DUP, would look to soften some of the Conservative social proposals, and the books will need to balance in some way. This might result in changes to the required tax receipts, and in turn the rates charged.

“On the other hand, the DUP might be keen to pursue the Conservative vision of low Corporation Tax, to remain competitive with the Republic of Ireland insofar as business taxation.

“As you can see, a hung parliament raises far more questions than answers, and in business uncertainty can often lead to a downturn in output. All I can do is advise businesses to keep focused on what they can control, and work within the landscape that they find themselves in. In fact - keep calm, and carry on.”

Richard Godmon, Menzies LLP

“Perhaps it’s no surprise that we have a hung parliament with no outright majority for any party. There were marked differences between the two main parties’ manifestos, and there were clearly two very divided camps in the country.

“This may mean that it is going to be very difficult to get any of the main promises into legislation, so perhaps whilst parliamentary proceedings maybe exciting, actual changes to the tax rules may be limited.

“Of more interest will be the negotiations for Brexit, and whether a united UK front is possible and forthcoming enough to ensure the best deal for the country.”

Luke Davis, IW Capital

“When Theresa May first announced the snap General Election, the polls were suggesting a comfortable Conservative victory and the opportunity for Theresa May to confidently lead Brexit negotiations. In a dramatic turn of events, the Conservative party now finds itself in a fragile position – looking to minority parties as a means of securing its ruling position in Westminster.

“We are in for an eventful couple of days, but it is important that the ensuing events do take distract us from some of the key issues facing the UK, namely maintaining a robust private sector driven by the nation’s thriving community of innovative and high-growth SMEs. The election result does not take away from our country’s impressive business potential, a quality that allows Britain to endure as an entrepreneurial nation.”