Business confidence plummets as political crisis grips Britain

Britain’s descent into political crisis just days before Brexit talks begin has sapped confidence among business leaders and infuriated bosses who were already grappling with the fallout from the vote to leave the EU. The failure by Prime Minister Theresa May to win a parliamentary majority in last week’s election has pushed the world’s fifth largest economy towards a level of political uncertainty not seen since the 1970s. May called the election to secure a mandate for her vision of a “hard Brexit”-driving down migration by taking Britain out of the single market and the customs union.

Instead, she got a hung parliament in which no single party has a majority. Business leaders demanded a re-think. “The UK has had a reputation, earned over the generations, for stability and predictability in its government,” a senior executive at a multi-national company listed on the London FTSE 100 told Reuters on condition of anonymity.

“That reputation in 12 months has been destroyed, truly destroyed. First by Brexit and now through this election.” A survey by the Institute of Directors (IoD) found only 20 percent of its nearly 700 members were now optimistic about the British economy over the next 12 months, compared with 57 percent who were quite or very pessimistic. The IoD survey, taken after the election, found a negative swing of 34 points in confidence in the economy from its previous survey in May.

“It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders, and the consequences could - if not addressed immediately - be disastrous for the UK economy,” said Stephen Martin, director general of the IoD.

The collapse in confidence, which follows a shortterm drop after last year’s Brexit vote, coincides with a slowdown in the wider economy that has taken hold since the start of this year, as rising inflation pushes up the price of goods.

Figures from credit card firm Visa showed British consumers turned more cautious even before the shock election result, with households cutting their spending for the first time in nearly four years last month. The Confederation of British Industry (CBI) warned there was now a risk businesses would cut back on investment which has largely held up since last year’s Brexit vote. —Reuters