What does an early election mean for business?

The PM wants a stronger mandate for her Brexit vision.

by Jack Torrance
Last Updated: 19 Apr 2017

Well that was unexpected. After months of denying she might be tempted to call an early election the Prime Minister has decided to go to the country. As if we’ve not had enough political turmoil in the last three years, which have already encompassed an unpredictable general election and referenda on Brexit and Scottish independence.

Still, one can hardly blame her. The Conservatives teeter on a slim working majority of 17. Two polls over the weekend gave the party a 21-point lead over Labour, the biggest lead for a party in power since 1983. Winning a general election would give succour to May’s claim that she has a mandate to deliver the hard Brexit her government is intent on. And then, if the economy slows, the Brexit talks go seriously badly and the public mood turns sour...what chance would she have if she waited until 2020?

But what does it mean for business? The markets provide mixed messages. The FTSE 100 is down around 1.5%, though that’s partly down to the increased threat of war with North Korea. But after sliding a little ahead of May’s announcement, the pound is up slightly against the Dollar at its highest level since February.

Business groups’ reaction to the announcement has been similarly lukewarm. The Institute of Diriectors says businesses ‘will just have to endure yet another campaign,’ but EEF, the manufacturers’ organisation, said that, ‘industry will welcome the Prime Minister’s decision to seek a clear mandate.’

In the short term there will clearly be greater uncertainty. While May’s victory seems all-but inevitable there is always a chance of an upset. A shock rise in support for the Lib Dems or an unlikely good turn by Corbyn in the TV debates could deny the Conservatives a stable majority. The risk of such a surprise could delay investments and slow down the economy as a result.

But in the longer term an election could be a benefit. The current situation, in which a handful of Tory MPs could scupper May’s plans, is arguably good for democracy but bad for stability. May will now have to lay out her plans for the future in greater detail – not just on Brexit but on her ‘industrial strategy’ and other business policies on which she is yet to set out a position. Meanwhile the likely annihilation of UKIP and possible deposition of Jeremy Corbyn would reduce the chance of a chaotic outcome when the next election rolls around.

Businesses may not be especially keen on the brand of Brexit she seems to be pursuing, but a strong mandate from the country will at least mean we know with greater certainty the direction the government is pulling in. The prospect of leaving the EU with no deal on the table at all seems less likely than before. But on the other hand, winning an election on an anti-Brussels ticket didn’t work out so well for Alexis Tsipras in Greece.

It’s going to be a tumultuous six weeks. In the meantime here’s a few pieces from the MT archive on how to cope with - and make the most of - uncertainty:

How to square up to uncertainty 

Managing uncertainty - a guide for leaders 

Entrepreneurs need to embrace uncertainty

Image source: SecretLondon123/Flickr

Tags:

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today