Message from Dr Adam Marshall, Director General of the British Chambers of Commerce
On April 24th I wrote in the Times’ Red Box on the General Election being a new source of uncertainty for businesses. The BCC will shortly release its election manifesto, and will engage with all political parties to ensure the interests of business are represented during the campaign and by the new government. My article is below:
So Theresa May has indicated her desire to go to the country on the 8th of June. For the first time in the short life of the Fixed Term Parliaments Act introduced by her predecessor, the Prime Minister is seeking to capitalise on her high standing in the polls to gain a personal mandate to carry out her programme for government.
From a Westminster vantage point, Mrs May’s political logic is entirely understandable. A thumping election win, if it materialises, would end her razor-thin parliamentary majority, temper critical voices within her own party, and has the potential to dramatically weaken some of the opposition.
Yet from the perspective of business, the economic logic is decidedly less clear.
While there are sure to be some voices in business who believe that an ample political mandate could strengthen the PM’s position in the forthcoming Brexit negotiations, and allow her to undertake a bolder domestic reform programme, I am willing to bet that in business communities across the UK, an election will generally be seen as a new source of distraction and uncertainty.
Nearly two months of election fever means less attention will be paid to the domestic economic agenda and the detailed preparations for Brexit, as ministers campaign, Whitehall goes into Purdah lock-down, and politicians gleefully down tools on legislation in order to canvass on doorsteps. At best, six weeks of vital preparation time will be lost; at worst, post-election ministerial changes could make the period of transition much longer. Question marks also now hang over a range of unfinished consultations, reviews and projects — some of which may not survive post-election.
The media frenzy surrounding the election will affect the animal spirits of business, as well. In survey after survey since the referendum vote, we have been reporting solid levels of overall business confidence. In the here and now, many firms across the UK have been doing well. It remains to be seen whether these levels of confidence will be affected, positively or negatively, by Mrs May’s decision to go to the country — to say nothing of the many investment decisions that companies large and small are pondering. Further volatility in sterling, which nose-dived prior to the PM’s announcement and then soared thereafter, will be a big factor as firms weigh up their business models, and plans to invest or recruit.
Three questions will be on the minds of many businesses over the coming days — questions which Mrs May, and indeed the leaders of the other political parties, will need to address.
First, what does the election mean for the terms and path of Brexit? At the time of the announcement, and peak ‘noise’, I heard one member of the commentariat say that a strong result for the PM would mean a soft Brexit — and another say precisely the opposite. Businesses will want more clarity, and to know exactly where each main party stands on the key threats and opportunities that lie ahead. They’ll also want assurances that the tone of the campaign doesn’t undermine the eventual winner’s ability to work with their European opposite numbers on the best possible Brexit deal.
Second, what happens to the domestic business agenda? For the vast majority of companies in the business communities I visit, Brexit feels far away and far off — whereas the high up-front cost of doing business, poor broadband, the inability to recruit successfully for vacancies or transport gridlock are what matters. If Theresa May wins a large personal mandate, will she take radical steps to address these generations-old complaints and give businesses the foundations they need to drive growth — or devote her newfound political capital to other priorities?
Third, what about the nations and regions? Businesses in Scotland will be thinking about what a Westminster election means for the SNP’s controversial plans for a second independence referendum. Firms in Northern Ireland are pondering a Westminster election without a settlement to restore devolution, and in many parts of England, upcoming elections for new city-regional mayors whose powers matter to local business success could be overshadowed by a national poll just a month later. For the business communities I see in many parts of the UK, the future of devolution is an important consideration in their planning — and one where they will want clarity, too, over the weeks ahead.
Ultimately, businesses have little control over when and how politicians call elections. Many say they are growing more used to political uncertainty, having navigated the 2014 Scotland referendum, the 2015 General Election, the 2016 EU referendum before being presented with General Election 2017. Yet they are watching carefully — and will rightly demand answers on the big economic questions from all parties over the coming weeks.
To sign up to the Red Box email visit https://www.thetimes.co.uk/article/newsletter-signup-redbox-925pqzzpj