Industry reacts to hung parliament




Theresa May has been unsuccessful in her bid to increase the Conservative majority in parliament as the UK enters crucial Brexit negotiations.

After a tumultuous year for businesses – with dramatic fluctuations in the value of sterling and concerns over access to the single market – some saw the general election as an opportunity to deliver greater certainty over the country’s future direction.

However, with no clear winner able to form a single-party majority, precisely who, how or what the UK will demand from the EU is now in the balance.

“Without doubt, a hung parliament is the worst outcome for the business community,” lamented Paul Marston, managing director of RateSetter Commercial Finance.

“While politicians vie for position over the next few days, a shadow of uncertainty forms, meaning that small business owners are more likely to put their growth plans on ice until the political and economic outlook stabilises.”

Earlier this week, specialist lenders warned that a hung parliament would be disastrous for the housing market.

“Political instability breeds procrastination on the part of homebuyers and sellers and for over a year now we have seen the effects of that on volumes, if not so much prices, as a consequence of the EU vote and then the snap general election,” said Russell Quirk, founder and CEO of eMoov.co.uk.

Jeremy Leaf, former chairman of the Royal Institution of Chartered Surveyors, attributed the result to the hopelessness of first-time buyers who have struggled to get on the housing ladder in recent years.

“If there is one message that has come out of this election, it is that the young have voted overwhelmingly for change.”

‘This is the exact wrong moment for a construction slow down’

However, with former housing minister Gavin Barwell having lost his Croydon Central seat, the supply of new homes could also suffer.

“No business likes uncertainty and housebuilders like it least of all,” explained Greg Hill, deputy chief executive at Hill.

“This hung parliament and the horse-trading that will take place over housing policy to get a coalition in place means that many housebuilders will hit the pause button on their investment decisions.

“This is the exact wrong moment for a construction slow down.”

Gavin Barwell Theresa May
Former housing minister Gavin Barwell (pictured above, right) lost his seat in Croydon Central

These business delays could be exacerbated by what some are predicting will be a major disruption in the value of sterling.

“From here, political disarray could lead investors to lose confidence and withdraw funds; or investors may assume that European negotiators will capitalise on the UK’s weakness, play hardball and so raise the risk of a ‘hard’ Brexit, to which the pound would react poorly,” warned Ed Smith of advisory firm Rathbones.

Businesses which may have been unfazed by a lack of direction in government could be impacted by a weaker pound and a subsequent rise in the cost of international trade.

This could result in further freezing of growth plans as businesses look to home rather than expansion abroad.

‘The priority must be for politicians to get their house in order’

And while overseas investors may be attracted to their greater spending power in the UK, the threat of both financial and political instability could be enough to make them wary of committing any funds.

“The priority must be for politicians to get their house in order and form a functioning government, reassure the markets and protect our resilient economy,” urged Carolyn Fairbairn, director-general of the Confederation of British Industry.

“The prospect of a possible softer Brexit on the cards, with [Jeremy] Corbyn leading the negotiations could ensure a healthy relationship with the EU, however, it’s at this point [that] we will find ourselves questioning whether the UK is still an attractive investment for international investors to set up shop in,” added Tim Mycock, development director at Reditum Capital.

Jeremy Corbyn
Jeremy Corbyn's Labour exceeded expectations in the election

The Federation of Small Businesses (FSB) has now called for a delay to the scheduled start of Brexit negotiations, rather than a rush to begin in 11 days’ time.

“It is important to go into the Brexit talks from a position of strength, focused on getting the best deal possible for trade and access to workers and skills,” insisted Mike Cherry, national chairman of the FSB.

“Negotiations should be led by a government and a prime minister that will be in place for the duration.”

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