What’s Going On Here?
On April 18th, the PM strategically (and optimistically) called for an election to strengthen her hand… but it didn’t exactly go to plan.
What Does This Mean?
Since Theresa May called this snap election, many political commentators thought that the Conservative party would wipe out Labour and increase their majority in Parliament. In reality, the outcome has left the PM in a much weaker position. Why this has happened is not down to any one single factor. May’s manifesto points were a bit controversial (like scrapping free school meals). Her ‘strong and stable’ mantra didn’t reflect in her character, as she refused to debate with other leaders. Her main opponent, Jeremy Corbyn, ran a campaign that was more successful than anyone could have guessed.
Now we have a hung parliament with no overall majority. This spells a period of uncertainty.
Why Should Firms Care?
Although the Tories didn’t win an outright majority, the government still remains Conservative. This is because they intend to form a coalition (an alliance with another party) calling on the DUP to make up the extra seats they need. But the power of the Conservatives will be watered down. This isn’t really an issue in areas where the two parties agree (like reducing corporation tax). But they will have to compromise in policy areas where they disagree, most importantly on Brexit.
The DUP is known to want a ‘soft-brexit’ (where Britain keeps some of their EU membership and allows free movement). Most businesses want this too, as losing access to the single market would mean access to fewer customers. But the Conservative’s have campaigned for a ‘hard-brexit’ (which would mean that we would completely leave the EU). Rob Aird, a partner at Ashurst, says that before Brexit negotiations can run smoothly, the two parties must negotiate between themselves to agree on the objectives.
Businesses need certainty to make good decisions. As no one is sure of where we’re headed now, it’s possible that investment could be stifled as people wait to see what direction the negotiations take. Law firms would want an economy where businesses are thriving and investing in legal services. They too would echo the call for clarity.
As negotiations for Brexit begin, it’s important that there is rapid, decisive action to finalise the agreement. The CBI (a UK business organisation made up of 190,000 businesses) has released a statement calling for the wellbeing of the economy to be the priority in the negotiations. As far as they’re concerned with Brexit, the softer, the better.
Article written by Idin S.
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