Markets yearn for Tories in spite of economic mess

WE live in curious times indeed, which by now kind of goes without saying. And we have had to get used to all sorts of utter nonsense on the political front, notably from the Tory Brexiters. However, that does not prevent some of the more bizarre manifestations of these times from generating a degree of astonishment.

Specifically, it was fascinating and demoralising to watch sterling’s reaction to the ebb and flow of the various opinion polls ahead of the General Election.

The pound has tended in recent weeks to rise on the back of poll results indicating a clear majority for the Conservatives under Boris Johnson.

In contrast, polls pointing to a tighter result have dampened the pound, as has been seen at certain points this week.

Financial market players’ enthusiasm for a Conservative victory might be something of a historical fact but, in the current set of circumstances, it is surely nothing short of remarkable. After all, the Tories have presided over an extraordinary economic shambles for nearly a decade now.

Their savage austerity programme, as well as damaging society, has choked off economic growth, taking large amounts of money from millions of people on low incomes who have to spend all that they have to live. That these ill-judged and morally repugnant measures would bear down on growth was always a matter of simple economic arithmetic, taking away from aggregate consumer demand. Sadly, the Tories either could not or chose not to grasp this simple arithmetic.

Not only that, but the Conservatives have turned a grim situation brought about by their huge and protracted austerity error into a total circus as they have managed to bring UK economic growth shuddering to a complete halt with their Brexit odyssey.

The Tories have triggered much dismay in the business community over Brexit. Business investment has been hammered by the uncertainty that has ensued in the wake of the summer 2016 referendum on European Union membership that former prime minister David Cameron should never have staged in the first place.

The scale of the Tory-induced economic calamity might be viewed by some as all the more remarkable given that the Conservatives have traditionally been regarded as the party of business. Then again, the Tories have form when it comes to making a right mess of the economy. Remember the Thatcher and Lawson boom-and-bust?

It is interesting to observe the pound was, not so long ago, climbing when the cross-party campaign by politicians to stop Mr Johnson achieving Brexit “no matter what” by October 31 was bearing fruit.

Sterling was, at that time, coming under pressure when there were developments that heightened fears that Mr Johnson might propel the UK economy toward a no-deal Brexit.

Sterling, even at $1.30, is way adrift of near-$1.50 levels at which it traded on

June 23, 2016, ahead of the EU referendum result. That said, the pound’s general rise in the run-up to the General Election seems remarkable given a raft of economic data showing the UK economy is currently putting in its worst performance since the depths of the 2008/09 recession. Such grim data would usually weigh on the pound.

Office for National Statistics data on Tuesday showed the UK economy stagnated during October after declining in each of the previous two months, its worst run since the first quarter of 2009 amid political and economic uncertainty fuelled by Brexit. Comparing the three months to October with the May to July period, UK gross domestic product was flat.

It seems apparent financial players are not enamoured by Labour policies under Jeremy Corbyn, which is predictable given their personal and institutional freemarket desires. But this does not, in the context of sterling’s moves, explain financial market enthusiasm ahead of the election for a Johnson win rather than a hung Parliament, given the latter could be seen to offer the hope of something more moderate eventually emerging, before huge economic damage was done.

This column has been written before the results of the General Election emerge.

However, it is crucial to realise that, whatever the result has been, we are not by any means near the end of the Brexit fiasco. This is a simple reality. Nevertheless it is a reality that may surprise Brexit fans, given Mr Johnson’s election campaign drive, with the “Get Brexit Done” slogan he and adviser Dominic Cummings have propagated, to portray the act of leaving the EU as something to be achieved on January 31 with no detrimental consequences.

What such an act would in fact do, especially when combined with the Tory manifesto pledge not to extend a transition period beyond the end of next year, is set the clock ticking on a ridiculously short timescale to secure a future trade deal.

In the run-up to the election, experts have flagged the potential for an ultimate no-deal departure in such circumstances.

Through no fault of their own, but rather as a result of political spin, many people appear to believe that a hard Brexit would be avoided through any type of deal. Nothing could be further from the truth.

A hard Brexit would only be avoided if the UK were to remain in the single market, benefiting from continued frictionless trade within the bloc and, crucially, from free movement of people to and from other EU countries.

Such a soft Brexit seems of absolutely no interest to Mr Johnson and his ilk, even amid polite but clear warnings from the likes of big multinational car manufacturers about the importance of frictionless trade.

What is more, the arch-brexiters have not been moved either by the post-brexitvote loss of talent and labour from other EU nations with people having already departed the UK for other countries in which they view their future as more secure and predictable.

Those driving Brexit continue to give the impression they are interested in it for one reason: to clamp down on immigration.

Such a clampdown would, of course, add mightily to the woes of a UK economy crying out for overseas workers to enable growth and pay for public services, against a grim demographic backdrop.

Then again, it would certainly not be the Tories’ first grave economic mistake.

Those driving Brexit continue to give the impression they are interested in it for one reason: to clamp down on immigration