UK election brings further uncertainty for business, but strengthens pound
The news that Britain’s Prime Minister Theresa May has announced that a snap general election will be held on June 8th sent sterling to its highest point against the dollar since December, but spells further uncertainty for businesses.
The announcement on Tuesday comes just three weeks after May sent a letter to European Council president Donald Tusk to formally begin the UK’s withdrawal from the EU.
The next general election was scheduled for 2020, and May on Wednesday will seek Parliament’s approval to bring it forward.
While the British public may be suffering from politics fatigue, May’s aim in calling an early election is to increase the Conservative Party’s majority in the House of Commons, which would enable it to pass the Great Repeal Bill (needed to replace existing EU laws post-Brexit). The Conservatives’ working majority currently stands at just 17.
An election win would also strengthen May’s mandate to take Britain out of the EU and thus her position in Brexit negotiations with other member states. May became PM as a result of fellow Conservative David Cameron’s resignation in the aftermath of the June 2016 referendum that decided in favour of the UK’s exit from the EU.
The news strengthened sterling, which reached $1.275 against the dollar on the afternoon of the announcement, its highest point since December.
The election brings two months of further uncertainty for businesses, who have as yet received little clarification as to the government’s strategy for negotiations with the EU.
“Businesses are having to get used to being buffeted by the changing winds of politics at the moment, and will just have to endure yet another campaign,” Stephen Martin, director general of the Institute of Directors, said in a news release.
The most urgent priorities are improving the UK’s productivity and seeking the best Brexit deal possible, said Carolyn Fairbairn, director-general of the Confederation of British Industry (CBI).
“Firms are clear about the serious risks of failing to secure a deal and falling into World Trade Organisation rules. It is vital that negotiators secure some early wins and all parties should commit to working to ensure businesses can continue to trade easily with our EU neighbours, while seeking new opportunities around the world,” Fairbairn said in a news release.
The election campaign “must be used as a chance to properly debate what leaving the EU means for the long-term future of the UK, including how we continue to bring in the skills employers need,” Martin said.
Martin added that businesses would also want to hear the parties’ longer-term plans to address “the changing nature of business and work, automation, and our ageing society.”
To ensure the nation continues to be competitive in the longer term, “it is essential to get the UK’s foundations right, from building a skills base for the next generation, to investing in infrastructure, energy, and delivering a pro-enterprise tax environment,” Fairbairn added.
—Samantha White (Samantha.White@aicpa-cima.com) is a CGMA Magazine senior editor.