As the dust settles from last week’s general election, UK businesses have raised concerns over what a hung parliament could mean for the country.
Whilst many predicted that the UK prime minister Theresa May would deliver a strong Conservative government after 8 June, in fact a shock result resulted in a hung parliament, with the Conservative party winning 319 seats, short of the 326 needed for a majority.
Timeline for Brexit
Nearly 700 business leaders took part in a survey by the Institute of Directors (IoD) and it revealed a dramatic drop in confidence amidst the concerns over political stability and its impact on the UK economy.
Stephen Martin, director general of the IoD, said:
“It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders, and the consequences could – if not addressed immediately – be disastrous for the UK economy.”
According to IoD members, over 90 percent believe the uncertainty over the makeup of the new governments is a cause for concern. As well, there has been a drop in confidence in the UK economy – with around 57 percent reporting they feel either quite or very pessimistic about the economy.
The business leaders said the overall priority for the new government should be to reach a new trade deal with the European Union, with negotiations due to officially start next week.
Nearly half of those surveyed said they believed the uncertain trading status with the union was having a negative impact on their organisation, a total of 46 percent, so it is understandable that EU trade negotiations should come at the top of the list.
“Business leaders are keen to see the new government get to work in Brussels and on the domestic front. Ensuring negotiations start well, and delivering higher quality skills and infrastructure across the country, must be the priority.”
Concerns over how the UK economy will function as a result of the election result are not unfounded. The pound fell sharply last Thursday when the exit polls predicted a hung parliament and has continued to suffer since.
David Lamb, head of dealing at Fexco Corporate Payments, said:
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“The blunt truth is that Brexit uncertainty is back with a vengeance – and the pound is once again in the firing line. Nearly a year after the Brexit referendum result plunged sterling into its prolonged purgatory of volatility, there is no end in sight.”
This uncertainty could continue over the next 18 months, according to analysis by Dun & Bradstreet, as companies will have to wait to assess the impact the Brexit negotiations will have on their business.
Markus Kuger, senior economist at Dun & Bradstreet, said:
“We predict that in the long run, the election result could make a ‘hard’ Brexit – which we believe would be harmful for the British economy – impossible. The best advice for businesses is to monitor the progress of negotiations, and use the latest data and analytics to assess risk and identify potential opportunities.”
Some analysts believe the political uncertainty could be a good thing for the UK and the pound.
Richard Berry, founder of the currency specialists, Berry FX said:
“There are so many variables in play that the pound could rise in the days ahead as the likelihood of a soft and more palatable Brexit increases. As peverse as it seems, political chaos could ultimately translate into sterling strength.”