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Are businesses turning away from Theresa May?

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Katya Puyraud of Euro Start Entreprises interprets the mood in advance of election day.

Think Conservatives and you think business. The current governing party has always been inextricably tied to the interests of commerce in the UK, back to Thatcher and beyond. Their policies of privatisation, corporation tax cuts and red tape reduction have developed an image of economic competence that has seen businesses back them to the hilt. A combination of vocal support and party funding has formed a significant part of the last two Tory electoral victories.

Recently, however, this cast-iron support has come under question. An apparent move away from the party’s favoured free market economic model has left businesses lukewarm and wondering where the Tories are headed. While it’s debatable whether the opposition’s vision is more palatable to business, the fact that this debate is even being had may worry the current government in the run up to June 8th.

Manifesto malaise
The Conservative manifesto has been a difficult sell for many groups, but the most unusual dissent has come from business interests. Analysis by the Telegraph of small business leaders suggests that the reaction on social media has been almost overwhelmingly disapproving: over 50% of responses were negative, and only 8% were clearly positive. Larger businesses have not taken it much better, with Morrisons boss Andy Higginson calling their policies an “attack on business.”

Chief among the complaints is the lack of costing throughout the manifesto, making up 34% of complaints logged by the Telegraph. This is thrown into particularly stark relief by the ‘fully costed’ Labour manifesto, though there are indications that this was rushed and is not entirely accurate. Still, combined with the recent U-turn on the cost of social care, May seems to have undermined the ‘strong and stable’ slogan that has been the bedrock of her campaign.

It is the general willingness to complain that might hurt May the most. The manifesto pledges are only the latest in a line of decisions that have tested the resolve of the business community; these include raising the minimum wage, a controversial apprenticeship levy and a flagship policy to cap energy prices. With the additional burden of slowing consumer spending and political uncertainty, business leaders say they are struggling to shoulder these burdens.

Deal or no deal
Dwarfing these, however, is the thorny issue of Brexit. Businesses have put a brave face on things, and most feel confident of pulling through what will be a challenging period. But they still face a significant instability, not least because of the government’s insistence on a ‘hard Brexit’, and an unwillingness to clarify its negotiating position this early on.

For businesses contributing to the UK’s £14.3bn trade deficit, import costs have risen thanks to the weakened pound sterling. These now have to be passed on to consumers who are spending less, contributing to the recent fall in growth. And the future of exporters remains uncertain, with 44% of UK exports going to other EU countries.

It’s notable that in the weeks since the manifesto launch, Theresa May has moved away from domestic policy issues and back towards Brexit. While she notably did not support it, her apparent willingness to leave negotiations with ‘no deal’, as opposed to ‘a bad deal’, has won plaudits.

Whether this is an economically sensible approach is questionable; any deal involving billions of pounds in settlements is likely to be seen as a bad deal. But what some would see as stubbornness, many see as strength – a quality that the more demure Jeremy Corbyn sometimes is perceived to lack.

Opinion still varies on Brexit when it comes to ideological grounds, as well as other political factors, but it did not represent the pragmatic choice. The ability to acquire the best person for the job and trade freely only benefits business, and these abilities remain under direct threat. The last thing SMEs want from the government at this uncertain juncture is policies that upset the status quo.

Labouring the point
On these grounds at least, Labour do not present a particularly credible alternative. Jeremy Corbyn has proposed a tax rise for the top 5% of earners in order to pay for massive public expenditure, as well as nationalising certain keystone industries; none of this plays particularly well to larger businesses. Questions have also been raised of Corbyn’s leadership qualities following Labour infighting, something that may inhibit his influence on the global stage.

But smaller enterprise will not be hit by these tax cuts, and big business is hardly in favour of the Tories’ move to give employees more power in the boardroom. While its position on Brexit has been muddled, Labour also represents the most likely choice to pursue a softer approach to negotiations, and would do so without the dubious services of Boris Johnson.

What this shift represents remains uncertain. It is entirely possible that business interests will continue to simmer, aware that there are few options other than to quietly lobby government. But the outcome of the election could prove decisive.

A more likely scenario than a Labour victory would be a coalition government. This would have the potential for more balanced policymaking, involving both sides of the spectrum – and both sides of the Brexit vote – in decisions with decades of consequences. But it could also descend into unwelcome chaos and uncertainty, given the polarised opinions on each side. It would also throw doubt on Theresa May’s mandate to continue as both prime minister and party leader.

As ever, British enterprise will try to adapt to the hand it’s given. Brexit is not an immediate positive or a long-term one, but enough remains to be negotiated that businesses can be optimistic. While social issues have altered the momentum of the election campaign, the battle for Brexit is probably where the war will be won.

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Former journalist Katya Puyraud is the co-owner of Euro Start Entreprises, specialising in company formation in France and the rest of the EU. Since 2007 Euro Start Entreprises has helped budding digital nomads, entrepreneurs and expanding SMEs to open their companies in over 30 countries worldwide.

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