General election: UK businesses, economists and investors react to Theresa May’s shock announcement

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Theresa May has called for a snap general election on 8 June sending the FTSE 100 lower and causing the pound to jump after falling sharply in the lead up to the news breaking.

Here’s a look at what asset managers, economists, analysts and business leaders expect the election will mean for financial markets, the economy and businesses in the longer term.

Luke Bartholomew, investment manager at Aberdeen Asset Management:

“No one was expecting this. Not least because the Government itself ruled an election before 2020 out barely four weeks ago. But Theresa May has clearly smelt an opportunity to consolidate her mandate ahead of the Brexit negotiations.

“The market reaction has been muted so far. Sterling sold off initially and has now come back. But it will take investors some time to digest the effects of the election in the next few days. A big factor for them is whether the election will make a softer stance on the Brexit negotiations more likely. The election should hand Theresa May a much bigger mandate to stand up to the harder line, anti-EU backbenchers which currently hold a disproportionate sway over her party’s stance on Brexit. That would be welcomed by financial markets. There’s also a decent chance of some volatility now with imminent elections in both the UK and France.”

Adam Marshall, director general of the British Chambers of Commerce

“Many business communities will understandably be concerned that attention will inevitably shift from the economy and the intricacies of leaving the EU to a potential election campaign. Firms will want to be reassured that the key challenges facing the economy will be front and centre throughout any election period.”

Jonathan Loynes, chief economist at Capital Economics

“In terms of the potential impact, today’s announcement will clearly create some additional uncertainty in the short term. And there may be concerns in the markets that a stronger mandate for May will increase the chances of a “harder” form of Brexit. But this is not clear cut. For a start, May (originally a “remainer”, don’t forget) has sounded fairly conciliatory on some aspects of Brexit such as immigration in the early exchanges with the EU.

“And if the election does trigger Corbyn’s replacement as Labour leader, that might lead to more effective domestic opposition to the Government’s Brexit vision. These points might help to explain why the initial falls in the pound have already been more than reversed. All-in-all, another interesting twist to the Brexit story, but there is nothing in all of this to alter our view that the economy will continue to hold up rather better than is generally expected.

Dean Turner, economist at UBS Wealth Management

“Theresa May’s surprise announcement has caught markets on the hop today, but they are not overly concerned by the prospect of a snap election. The muted response in sterling, gilts and UK equities suggests markets are savouring the possibility of much-needed clarity around the Government’s Brexit negotiation stance.

“If the general election is held, we believe it is highly likely the Conservatives will increase their majority and firm up the future direction of Government policy, particularly in regard to Brexit.

“The Prime Minister has been softening her rhetoric on Brexit in recent weeks and we expect her to use this election to secure a mandate for future direction of the talks.

“Although disruption to the UK economy in the short-term is still likely, we believe that the longer-term outlook is brighter.”

Neil Wilson, analyst at ETX Capital

“For investors it adds another layer of complexity to an already uncertain picture for UK and European assets. Volatility is likely to remain elevated over the coming weeks. And as elections are so unpredictable, there is always the outside risk it could spark a reversal in the entire Brexit process. Can the Lib Dems cobble together a pro-Remain ticket that upsets the Tory apple cart?

“However on the current polling the likelihood is we will be left with a government on a more secure footing that will ensure Brexit means Brexit.”

Shilen Shah, bond strategist at Investec Wealth & Investment

“Overall, today’s announcement suggests that PM wants full control of the Brexit process without any interference from the opposition.”

 

Independent

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