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Softer Brexit on the horizon?

Friday 9 June 2017

"BREXIT and its outcomes will look very different after today" Gordon Fletcher, University of Salford Business School

Dr Gordon Fletcher, Finance and retails expert at the University of Salford Business School, said:

“No matter who leads the next government they will face some immediate decisions that have significant impact on the business community.

“Almost immediately after the new government is formed, Brexit negotiations will commence. The polls suggest a preference towards a softer form of Brexit but the influence of smaller parties in supporting the government will heavily influence the stance that is now taken. Brexit and its outcomes will look very different after today. The new government will need to bring some reassurance to businesses trading in Europe and employing EU nationals. Some certainties for these businesses would include assuring the rights of EU nationals after Brexit and the tone of the trading relationship that is wanted. This will bring a speculative period of currency trading and a 'jittery' pound.

“The first budget of the new government will be then its next major challenge. The influence of the DUP and Scottish Tories on a Conservative government may have impact on the devolution agendas - with an insistence on the strengthening of the Union as a single working entity. With a Conservative minority government the most likely expectation is a steady state budget that offers little innovation or big programmes of change. For businesses this means a steady state around tax rates and business support. A fragile political situation will mean that the greatest influences on policy come from the smaller parties and factions within the Conservatives. External voices including that of industry will inevitably take something of a back seat.

“The expected instability of a minority government will in turn bring instability to the business environment. Investment and commitment from businesses located outside the UK will be limited. For UK businesses, a shifting set of Brexit negotiations will potentially stall planned developments. In the longer run political instability will mean that a minority government has little chance of surviving its full term - creating a continued period of uncertainty for business and the economy.”

Dr Muhammad Amjad, expert in International Strategy at the University of Salford Business School said:

“The election results are clearly unexpected for the vast majority of experts and public alike and a hung parliament will fuel more uncertainty in the next few months. The Labour gains across the country in terms of seats and votes has substantially diminished the Conservative rhetoric of strong or stable. As it turned out, it is more wobbly and weak!

“Business confidence will initially be shaken by this further as we come to terms with the result and how Government formation is developed over the next few months.

“Stock market investors, large scale business projects and exporters and importers will be very cautious to not make any long term commitments just yet. In the medium term, a softer and more inclusive Brexit is appearing on the British horizon that will improve the business confidence in the UK and also the confidence of major European businesses. However, in the short term it is likely to be uncertain and shaky. An important implication is that people have voted against austerity economics and thus businesses will hope to see more developmental and business friendly approach amongst the new government.

“Also in the shorter term, currency volatility is likely to bother businesses. It is clear that in the medium to long term there is strong likelihood that there will be leadership changes in the new Government.

“Consumer confidence and therefore could be impacted. Unless clarity emerge soon on the nature of new government and its policies, we are likely to see a cautious consumer buying cycle leading up to winter this year and the early parts of the new year.

“I feel that a softer Brexit is in the long term interest of the country and if this message is clearly communicated then EU negotiators will adopt a softer stance and will also allow the new government some breathing space to focus on matters that voters now want them to focus on.”

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Sam Wood

0161 295 5361