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UK business confidence slumps as political uncertainty rises following hung parliament

June 22, 2017

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Type: Corporate Finance, Latest Blogs, Professional Practices Blogs, Trending

British business confidence has fallen sharply since the inconclusive election result that has left Prime Minister Theresa May weakened ahead of the forthcoming Brexit talks, according to a survey by the Institute of Directors (“IoD”) published last week.

 

The survey of nearly 700 members of the influential business group also exposed deep concern over the political uncertainty and its impact on Britain’s economy. The company directors surveyed could see no clear way to quickly resolve the political situation and they felt that a further election this year would have a negative impact on the UK economy.

 

“It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders and the consequences could be disastrous for the UK economy. The needs of business and discussion of the economy were largely absent from the campaign, but this crash in confidence shows how urgently that must change in the new Government,” said Steven Martin, Director General of the IoD.

 

The members of the IoD who took the recent survey are looking for any political certainty that can be found and are keen to see quick agreement with the European Union on transitional arrangements surrounding the UK’s withdrawal, and clarity on the status of EU workers in the United Kingdom.

 

The overall priority for the new Government, according to those IoD members who participated in the survey, must be reaching a new trade deal with the European Union. On the domestic front, work to deliver a higher skilled workforce and better quality infrastructure is considered vitally important.

 

Mr Martin commented “Business leaders will be acutely aware that Parliaments without majorities are more prone to politicking and point-scoring than most. If we do indeed see a minority Government, both sides of the aisle must swallow their pride and work on a cross-party basis on the most important issues. The last thing business leaders need is a Parliament in paralysis, and the consequences for British businesses and for the UK as an investment destination would be severe.”

 

“Saying this, there is also little appetite for a further election this year, and indeed business leaders are keener to see the new Government get to work in Brussels and on the domestic front. Ensuring negotiations start well, and delivering higher quality skills and infrastructure across the country, must be the priority.”

 

More than three quarters of the IoD members who took part in the survey believed that political uncertainty is either a significant or a slight concern for their organisation.

 

The IoD survey recorded a large negative swing in confidence in the UK economy from the previous survey carried out in May. While 20% of participants are optimistic about the UK economy over the next twelve months, some 57% are now either quite or very pessimistic. This compares with May, in which 34% registered their optimism, and only 37% reported pessimism.

 

If you would like to discuss this in more detail or you would like to speak with a member of our Corporate Finance team, please contact Paul Bennett or call on 01772 821021.

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