Don’t Look Now, Theresa

by Heat Recruitment

mikewilson

How IFA Magazine Editor-in-Chief Mike Wilson sees the election result:

(The only vine hanging off that cliff face is Jeremy Vine)

A sunny, slightly soggy morning, with a bracing south-westerly coming in from the Atlantic. For the groggy all-nighters, a bit of welcome relief and a chance to get some sleep at last. For those who prefer to wait until their news reports are a little firmer, a soft-boiled egg of a morning, but served up without UKippers for a change.

So here we have it. Even the Mail Online’s headline concedes that Theresa May has “Blown It”. And that it’s all her own fault, and that her own party is telling her that Nick Timothy and Fiona Hill, who authored the PM’s biggest tactical blunders, that it’s all over for them. And that Nigel Farage is warning of a disastrous second Brexit referendum. (Which would be odd, considering that that was exactly what he had been threatening to push for if last June’s referendum hadn’t gone his way. But hey, let’s try to be magnanimous…)

Hanging by her Fingertips

We’ll leave it up to the voters to decide what they think of May’s defeat. Or, indeed, whether they think that’s what she’s suffered? Certainly, the PM’s hopes of a 100 seat majority look now to have been a wild Tarzan-like lunge off a cliff for a desperately-needed swinging vine that didn’t turn out to be there. The only vine she got was the BBC’s Jeremy Vine, dissecting her catastrophic fall from hubris, and the only real Tarzan in the Tory party, Michael Heseltine, has been keeping his head down since he called her (and Brexit) ‘ridiculous’ back in March.

But back to the present. It’s clear that the Prime Minister failed to engage the public’s enthusiasm for the hard Brexit that she wanted. Tactical goofs aside, it seems probable to us that a second referendum would have revealed the buyer’s remorse that so much of the public are now expressing.

What does it mean for business?

It would have been possible for Mrs May to bluster past that reality if she’d bothered to carry the business community with her. But sadly, she didn’t bother. Ignoring appeals from the CBI and the business federations for more clarity about essential immigration, or about the cost implications of losing free access to the customs union, or how businesses were expected to budget for new job-creating projects when, for all they knew, their factories might turn out to be off-limits to any manufacturing option aimed at the EU.

It was worse for the financial institutions, which faced the potential loss of their European banking passports because of the PM’s line on immigration. The banking passport is an integral part of the Single European Market, which May has said she absolutely doesn’t want to be a part of. So what’s a banking business to do? Lay down some plans for moving at least part of its base to an EU territory, that’s what. The shareholders would have expected nothing less. And, according to last month’s EY report on 222 financial service firms, that’s what 45% of the investment banks were preparing to do.

Considering that Jeremy Corbyn has at least the ghost of a chance at becoming Prime Minister, the London financial markets appear to have taken the election news in good enough heart. The FTSE-100 put on 0.5% in its first two hours, which is small in relation to the usual relief rallies that the city has seen, but was notable in itself for being a relief rally at all. But what happens now to Mrs May, who seems to have been promoted well beyond her abilities and who has shown unwelcome signs of authoritarianism whenever things got difficult?

Oddly, New Opportunities Arise

Despite appearances, this is a moment for blue-sky thinking. The collapse of the hard-line May doctrine opens up the serous possibility that wiser heads within Conservative Central Office will try seriously to reconnect with the Londonites who were, almost to a man/woman, aghast at Brexit. Can the party pull it off? It might change everything. Just as long as they can muzzle Boris Johnson for long enough to strangle Mrs May’s strident ideas about not taking any nonsense from Johnny Foreigner.

For Labour, who still favour a soft Brexit with Single Market access, the Tories’ dilemma can hardly hurt. Even as members of a concerted opposition grouping (if that’s the way it turns out), they’ll have ample chances to make their case for a softer Brexit. And they’ll find no shortage of soft Tories in the House of Commons to help them in their pursuit. As for the Lib Dems’ demands for another referendum – no, I personally don’t think they’ll get far with that unless they can get something going with Nicola Sturgeon?

But the big opportunity comes from the other side of the Channel. For the EU27, who have been enraged and frustrated in turn by the self-professed Bloody Difficult Woman, Mrs May’s disgrace may prove to be a political break point which may create space for a new initiative. If May hasn’t got the popular backing she was claiming until this week, there could be some mileage in a more conciliatory approach aimed at her, or at her successor?

We live in hope. But first, Theresa May has got to survive the next 72 hours. Monday morning is going to be just as interesting.

This article is from IFA Magazine’s coverage of the General Election 2017.

Please click here to see more reaction from leaders in the financial industry.

Coverage includes industry insight: Hargreaves Lansdown, M&G Investments, Tilney, WisdomTree, Mirabaud Asset Management, Indosuez Wealth Management, Ayondo markets, Julius Baer, Miton and much more!

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