Business community reacts as Conservatives sweep to election victory

Economy & Politics | Latest News | National
Boris Johnson
Boris Johnson

Boris Johnson is this morning settling into a new term as UK Prime Minister after the Conservative Party swept to a sizeable general election majority – but has been urged by business leaders to prioritise the content of his promised Brexit deal over its haste.

Tory candidates made major inroads into traditional Labour territories in northern England and Wales, in some cases taking seats for the first time ever.

In what has been billed as ‘the Brexit election’, Conservative candidates secured wins in a host of strongly-Leave constituencies to claim an overall majority of 79.

In contrast, Labour’s share of the vote slumped to just 33% – the party’s poorest performance since the days of Neil Kinnock in 1992.

Mr Johnson says his party has created ‘an earthquake’ in British politics by redrawing the political map – and says finalising Brexit details remains top of the Tory agenda.

The prime minister said: “This one nation Conservative government has been given a powerful new mandate to get Brexit done – and not just to get Brexit done, but to unite this country and to take it forward, and to focus on the priorities of the British people, above all on the NHS.

“Yes, we will recruit 50,000 more nurses and 6,000 more GPs, and we will build 40 new hospitals across the country.

“I want to thank the people of this country for turning out to vote in a December election, which we didn’t want to call but which I think has turned out to be a historic election that gives us now, in this new government, a chance to respect the democratic will of the British people, to change this country for the better, and to unleash the potential of the entire people of this country.

“That is what we will now do.”

Labour leader Jeremy Corbyn retained his own seat and insisted in the aftermath that he would continue to remain in charge of the party during a ‘period of reflection’. However, he did reveal that he would not step aside prior to any future elections.

Other major developments on the night included the SNP claiming 47 of Scotland’s 59 seats, including the scalp of LibDem leader Jo Swinson.

Business community reacts

The Institute of Directors was among the first to speak out on the night’s events, urging the new government to prioritise sensible decisions over haste in finalising Brexit.

The organisation’s Director General Jonathan Geldart said: “After years of parliamentary chaos, directors want to see a Government that is clear-sighted about the challenges facing businesses, and ambitious, but realistic, in its response.

“British companies have been resilient amid the confusion, but they are eager for some clarity now.

Jonathan Geldart, Director General of the Institute of Directors.
Jonathan Geldart, Director General of the Institute of Directors.

“Business leaders’ thoughts will immediately be turning to Brexit. For directors, ‘Get Brexit Done’ will only have meaning once the details of our long-term future relationship with the EU are clear; they need a framework to plan for the future from.

“The Prime Minister must resist the urge for arbitrary negotiating deadlines, and should commit to a proper adjustment period that starts when businesses know the full detail of what changes they may be facing.

“Our members have made clear that the content and shape of any new deal are much more important than simply the speed in getting there.

“On the domestic front, we must now see progress on the challenges that have been holding the economy back, from skills to infrastructure.

“Many directors will be waiting for action on manifesto commitments such as incentives for R&D investment and business rates reform.

“Meanwhile, there are still big question marks around the Conservatives’ plans on immigration and big-ticket infrastructure projects.”

Clarity on Brexit – and an and to ‘economic uncertainty – was also identified as a priority by Niels Turfboer, Managing Director of responsible UK business lender Spotcap.

Niels Turfboer, Managing Director of Spotcap.

He said: “The Conservative majority general election outcome raises expectations for political and economic uncertainty to come to an end. The new government now have what they need to pivot from stalemate to action and move forward with giving the UK some much-needed momentum.

“First in line is the Brexit question, and there are several options on the table: exiting on the existing deal, exiting on no deal or renegotiation in some way.

“In all scenarios continued support of the business community should be a priority. The UK is one of the best places in the world to start, run and grow a business. This status should be protected as it benefits all through economic growth, job creation and prosperity.”

Simon Brownbill, Partner and Head of Practice Development at accounting and business advisory firm Hurst, believes the Conservative victory will be welcomed by the business community.

Simon Brownbill, Partner and Head of Practice Development at Hurst.
Simon Brownbill, Partner and Head of Practice Development at Hurst.

He said: “Over time, most of our clients were accepting of Brexit, but wanted our departure to be properly managed with a withdrawal agreement in place. There was frustration that parliament had failed to get behind previous deals and, in that sense, many of our clients, despite not necessarily being natural Conservative supporters, were rooting for an outright Conservative victory.

“Coupled with this, many of our clients were deeply fearful of Labour’s economic strategy and the perceived damage this would do to the prospects of businesses and their employees.

“All in all, this is a positive outcome for business given the current state of UK politics.”

However, Mr Johnson was also urged to ensure his party does more to support small businesses during its next term.

Bea Montoya, Chief Operating Officer at Simply Business – one of the UK’s largest providers of small business insurance – says the importance of SMEs to the UK economy cannot be ignored.

Bea Montoya, Chief Operating Officer at Simply Business
Bea Montoya, Chief Operating Officer at Simply Business.

She said: “SMEs are the backbone of our economy, accounting for 99% of all British business, and contributing a combined £2tn in annual turnover. However, too often they’re resigned to being little more than an afterthought for government.

“It is absolutely vital that small business owners and self-employed people are not left behind in this new era of leadership. We urge Boris Johnson and his party to make small businesses a priority and to support the nation’s self-employed workforce.

“The standard rate of business tax is at its highest level since 1990, at over 50%, and is a major issue for businesses across all sectors of the economy, so a review of rates will be well received. While the proposed £320m cut from 2020-2021 sounds promising, it equates to just 0.03% from April 2021. It’s a start, but we know rate cuts will need to go much further and deeper to have meaningful impact.

“Elsewhere in the manifesto, expanding start-up loans, increasing the employment allowance for small businesses, and clamping down on late payments will all be welcome changes should they come to fruition.”

Pound surges

The pound surged immediately the exit poll predictions were published at 10pm, climbing immediately against both the dollar and the euro.

Emma Wall, Head of Investment Analyst at Hargreaves Lansdown, heralded the move as ‘big news, but urged caution for investors.

Emma Wall, Head of Investment Analyst at Hargreaves Lansdown
Emma Wall, Head of Investment Analyst at Hargreaves Lansdown.

She said: “What a night! While the polls – and indeed the markets – were prepared for a Conservative win, it certainly wasn’t of this magnitude.

“Sterling bounced on the news of the exit polls, and while moving from $1.32 to $1.35 might not sound like much, in currency world that’s big news.

“The FTSE should open flat – but with plenty of rotation underneath the hood. The currency bounce will suppress the blue chip index, which has mostly overseas earnings, but improved sentiment will balance out that headwind.

“Investors who were brave enough to go long domestic equities – and in particular anything under nationalisation target from Labour, such as utilities and transport – should be rewarded.”

“While there will be enticing currency and market moves over the next hours and days, it is still very early days for the new government.

“As ever, investors looking to play politics should be wary. Even the professionals get these kind of macro market calls wrong.

“Investors all over the world often have a portfolio bias towards their domestic market, so before you pile into UK stocks now there is more certainty around, first check your current geographical exposure. Lack of diversification can lead to greater problems down the road.”

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