The decision by British Prime Minister Theresa May to call a snap election has taken everyone by surprise, including members of her own party. Coming just two years after the last general election, the move seems deliberately calculated to take advantage of the weak opposition, guaranteeing a strong majority and mandate to carry into prolonged Brexit talks.
However, it’s also possible that there may be more to this election than meets the eye. Polls have been wrong plenty of times in the last two years, and Labour leader Jeremy Corbyn has survived two leadership polls with clear majorities. Here then are the likely repercussions of the election result on June 8th, and what they might mean for businesses operating in the UK.
Most pollsters consider victory for the ruling Conservative Party to be nailed on. This is in no small part to their favourable perception: despite not supporting Brexit, current PM Theresa May has been lauded for her uncompromising attitude in delivering it.
There is also the question of the opposition. Thanks to the UK’s electoral system, only the Labour Party really stands a chance of securing the majorities needed to claim each seat in Parliament. But Labour are widely considered to be at a historic low point. A variety of factors have contributed to negative perceptions of their leader, Jeremy Corbyn, ranging from his political views to public gaffes, as well as infighting and uncertainty within the party hierarchy.
General elections are usually fought on a number of issues, but Brexit is likely to dominate the agenda, and it is Brexit where the Conservatives hand is strongest. With Brexit and the recent recession in people’s minds, it’s also notable that May is more trusted on the economy, with the Conservative seen as having stabilised the crisis which occurred during a Labour government.
A favourable outcome for the Conservatives would give May effective carte blanche in the national legislature, representing continued backing for Tory economic policy. This has always prioritised businesses and could get more favourable with a fall in corporation tax.
But it would also appear to settle the public discussion around Brexit. The Conservative Party line already seems to be that this is a second Brexit vote, and a victory would be taken as assent for the current, ‘hard Brexit’ approach.
In some sense, this would be a positive for businesses. May has broadly laid out her strategy and demands: The UK would seek trade deals under WTO tariff rates, lower corporation tax, and expand its partnership with the United States, potentially modifying areas such as food standards to allow the expansion of keystone industries. May would also have her entire five-year term to stretch out negotiations, if she so chose, eliminating any concerns about the mass transfer of EU laws to national statutes.
For businesses this would ultimately mean stability: they would know what to expect, and know they could safely conducting business up until the UK formally leaves. However, stability may only represent a safe platform on which to develop other plans. With the UK guaranteed to lose free movement of labour and access to the Single Market in a hard Brexit, businesses may use the extra time to simply polish their plans to leave.
After the calming election results in France and the Netherlands, the shockwaves of Brexit and Trump seem to have dissipated. A loss for the Conservatives at this election would upend that balance immediately. Given the scale of the task for the opposition, even making a dent in the Tory majority would be a herculean effort, and perhaps the biggest shock of them all.
Of course, pollsters have been wrong before. While public sentiment still seems favourable towards Brexit, the talk of a ‘hard Brexit’ and tangible issues like inflation have created some uncertainty. The hardball nature of early discussions, issues for EU nationals in Britain and loss of schemes such as Erasmus may also have swung a few voters.
The main issue is that any uptick in support is unlikely to be concentrated enough to actually win seats for Labour or the other opposition parties. Britain’s traditional 3rd party, the Liberal Democrats, have also ruled out another coalition government, although the larger SNP have not. With the Labour Party taking the role of insurgent underdogs, however, it’s not impossible to imagine that a complacent Conservative Party will not do as well as it anticipates.
Many voters would see this as fair redressing of the balance. A Conservative landslide would leave the 48% who voted against Brexit without fair representation, and would not do wonders for democracy. However it’s hard to say what effect a Labour victory would have either, given that they only tentatively opposed Brexit, and have since embraced the outcome of the vote. The Lib Dems and Greens represent the pro-European vote, but are unlikely to win many seats.
Even assuming that a coalition was formed with a minority Labour government, little is likely to change. The party’s left wing economic policies may lead to a less favourable business climate in the long term, but key tax rates are unlikely to change.
Crucially, the Brexit process is unlikely to be affected in a major way. A coalition may introduce uncertainty as the parties fight for influence, but Brexit is almost impossible to call off at this point. It’s also likely to be difficult by nature, given that concessions cannot be made on immigration without upsetting a large proportion of voters.
In a worst case scenario, this uncertainty could give the EU a stronger bargaining position. In the best case, it may open the door for a softer Brexit and an easier trading relationship. What uncertainty almost always causes is a fall in the Pound Sterling: a big help for foreign earners and big exporters, but unhelpful for anyone importing on a large scale.