The surprise outcome of the 2017 General Election, which saw the Conservatives fall eight seats short of a parliamentary majority, has raised all kinds of questions. One of the key questions in London is how it would impact on the local economy.
In the capital, seven seats changed hands, with four going from the Tories to Labour. Nationally, owing to a resurgent Labour Party and a disastrous campaign from Prime Minister Theresa May, the picture looks at best confusing. Many key policy areas will have to see a change of tactic, most notably the upcoming Brexit negotiations.
Due to start later this month, talk of a ‘Hard Brexit’ is likely to be shelved. Having to rely on the 10 MPs from Northern Ireland’s Democratic Unionist Party (DUP) to form a loose coalition is likely to add to the air of uncertainty. In economic terms, many London-based businesses who have significant trade with the European Union are unsure of what the future holds.
What Happens Next?
London’s GDP alone is, according to 2014 figures, £534.8bn. This makes up just over one-fifth of the UK economy as a whole, so if London is flagging, the rest of the country is likely to follow. Many businesses that trade regularly with European countries will be hoping that Brexit negotiations are handled sensitively and end in a good deal.
While there haven’t been any hints about what Prime Minister May and her negotiating team will say when heading to Brussels, the markets have reacted to all manner of negative outcomes. Ever since the UK voted to leave the EU last year, the fortunes of the Pound and many London-based listed companies have been diminished.
In the past month, Sterling has fallen by four cents against the Euro, owing to uncertainty about the election outcome. The FTSE 100 Index has been a little more even, although some businesses headquartered in London are watching developments in Westminster and Brussels with bated breath.
When learning how to trade forex, looking at the fortunes of the Pound over the coming months will be interesting. All the stats point to Sterling’s downward trajectory continuing, whilst multinationals in the City could look at moving their offices to Mainland Europe.
The Great Flight
Economic growth in the capital has, by and large, been higher than elsewhere in the country. Some industries such as technology have been buoyant, helping to cover any malaise in others like financial services. Speaking of finance, some major firms have already announced the movement of European operations from London to the EU.
One such example is Deutsche Bank, who claimed that 4,000 of its London-based employees may be forced to relocate post-Brexit. They presently employ 9,000 people nationwide, with 7,000 of them in the City. Other financial services giants including JPMorgan and Standard Chartered are also looking to concentrate their European operation businesses elsewhere.
For the local business community, there may be some cause for encouragement. With the Tories not having a majority, the likelihood of no deal being done is greatly reduced. The remote possibility of the UK remaining in the Single Market or the postponement of negotiations may give London’s businesses time to carry on as normal.