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Theresa May’s election gamble – good for business?

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This week’s announcement that we are set for a General Election on June 8 – subsequently approved in parliament by a crushing majority of 522 votes to 13 – has taken everyone by surprise.

Some are lauding Theresa May’s gambit. Having become Prime Minister by default post referendum, she is doing what Gordon Brown failed to do in 2007 – asking the electorate to support her, and give her a clear mandate to rule. She is arguing that she represents “strong and stable leadership”, an advantage as we look to negotiate the best deal following the triggering of Article 50, and our exit from the EU. Others are questioning her apparent U-turn, after months of telling the media there will be no such election. So why now, and what might it mean for UK business?

It’s quite interesting to look at Theresa May’s decision from a commercial perspective. Imagine she is a newly appointed CEO, assuming power after a boardroom shuffle. What’s the sensible strategic move? Having negotiated the first few months successfully, and assembled a new management team around her, she needs to consolidate. Now, she needs full endorsement from the shareholders, and to secure her position as the undisputed leader of the company going forward. It’s the oldest business rule in the book: a leader must be seen to lead from the front.

Even in this time of political unpredictability, her position seems strong. Her approval rating is high, and growing. She has opened up 37-point lead over the Leader Of The Opposition, Jeremy Corbyn, according to a recent poll of 10,000 UK adults. She’s helped by the fact that post referendum, UK plc has done better than many had predicted, and there is a sense of confidence particularly among the business community.

Business owners “90% confident”

BCMS surveys of business owners across the country have shown high levels of positivity about the economy – at a recent BCMS event in Reading (Building And Selling A Business in The Thames Valley, April 4), 90% of those polled were either ‘very confident or ‘confident’ of growth in the UK economy of the next 12 months. As one business owner told us: “We didn’t want Brexit, but we’ve changed from thinking ‘we are where we are’ to ‘let’s do this, and get it right’.”

As a general rule, the business community likes stability, and it doesn’t like risk. The political upheavals of the past 12 months in the UK, US and across the world have meant uncertainty in the markets, in policy, in currency fluctuations.

How will business sales be affected by a General Election? The election could add to the already volatile situation business environment in Europe with the UK, France and Germany all holding elections between now and the autumn. This, coupled with evidence that M&A decisions were delayed in the months running up to the EU referendum, could lead some to take a fairly negative medium-term view for corporate dealmaking. However, BCMS analysts note that opinion polls are not as close as they were in the run up to the Brexit vote. This, coupled with the UK’s strong performance post-vote, should help to allay fears of a drop in the number of business sales. In fact, the strength of the pound should help to buoy confidence in the UK, and drive domestic dealmaking.

With the General Election announcement, Theresa May would argue she is trying to deliver certainty, from consolidated position of strength.

Her decision is a risk, but like those taken by the best business leaders, it’s a calculated one.

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Posted Apr 2017
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