What does the snap announcement of a General Election mean for business?

Friday, April 28th, 2017

On Tuesday 18th April, the Prime Minister Theresa May surprised us with the announcement of a snap general election on 8th June 2017. This declaration has triggered much debate and plenty of groaning as we face seven weeks of saturated news coverage. The reasons behind this decision include wanting stability, strong leadership and a sense of certainty, as the UK leaves the EU.

The announcement though focuses again on the issue of Brexit and the consequences of that decision. The political sphere, not just in this country, but in Scotland, Europe and in the US, is more polarised than it has ever been in living memory and creating strong community divisions. The malaise in our trust in the political system is dangerous as the consequences can have a long lasting impact. The sleep walking into the Brexit outcome should serve as warning for this election and this time, the range of issues to debate will be wider as we will need to consider our European ties far more than before; this election will be broader and more complex as so many issues are now intertwined.

None of the major UK political parties, at this time of writing, are able to provide a firm date for the publication of its manifesto at this stage. The Liberal Democrats expect to be able to set a date within the next couple of weeks, while it is understood that the Labour manifesto will be finalised in the second week of May.

Yet, in the UK, as the political parties squabble, the business sectors have just been getting their heads down and producing commendably positive results. For the city and investors, the general message is to avoid knee-jerk reactions and panic. Those investors who do so, and ride out any short-term volatility are those who are rewarded in the longer term. The FTSE 100 fell 2.5% after election announcement and, whilst the pound rose sharply, there’s no doubt we will see more stock market volatility over the coming weeks.

Kingston Chamber of Commerce, as one of the largest independent chambers in London, and representing the interests of business communities across the borough, one of the significant
issues relates to small firms employing workers from the EU. We have, like many other parts of the country, small firms fear that they may lose skilled staff and replacing them could be harder, and more expensive. With the Labour proposal of increasing the living wage further, there could be many sectors, such as hospitality and retail, who could be facing difficult circumstances if these two issues in particular collide at the same time.

The UK thrives on small businesses, and it is clear that their growth and success impacts our economy considerably. Although the majority of small businesses are situated in the affluent city of London (17.8%) and South East (16.16%), overall, small businesses employ 52% of employees across the UK. (Source Gov.uk – Steve White – October 2013)

 

The Federation of Small Businesses (FSB)’s survey of 1,236 of its members, reported in What Small Firms Want From Brexit, found that:

  • 47% of respondents employed “mid-skilled” staff
  • 72% of respondents had recruited their EU staff after they had already moved to the UK
  • 95% of the respondents had no experience at all of the UK’s current “points-based “system for obtaining work permits for non-EU citizens
  • 56% of respondents were worried about applying any new immigration rules after Brexit, and
  • As many as 13% might move their businesses abroad, cut back on their activities in the UK or close altogether.

 

All business sectors need clarification on trade agreements as well as workers security.

In the retail sector, which is worth £93bn to the UK economy (and with approx 2.8 million workers), the “number one priority” for retailers in the Brexit talks is no new tariffs on EU goods, the British Retail Consortium (BRC) says. Shoppers could see their prices go up more than they can already see. “There is a limit to the amount of increased cost retailers can absorb,” a BRC spokeswoman says. Shops are already dealing with business rates, the National Living Wage and higher import costs due to the weaker pound.

For many small and medium sized enterprises, the EU is by far the biggest trading partner for smaller firms. The single market accounts for 92% of small business exports and 85% of imports, (Source; Federation of Small Businesses)

As June 8th looms in front of us, the impact of the election is very hard to predict as we have yet to hear in full what the various parties have to offer, and the issue of trust is probably one of the most important aspects to the voting.

We will have to consider not just the personal affects of who governs our country, but the
national and international views. With so many issues being debated, this election may come down to a simpler equation; which person do we like/dislike the most? In the US, we couldn’t understand how Hilary Clinton lost to Donald Trump but we failed to appreciate how highly disliked she was in certain areas of the country. In this election, it could end up exactly the same.

 

By Forbes Low – Executive Director of Kingston Chamber of Commerce

Forbes Low is also the owner of Forbes Design Associates, design and branding specialists. 

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