Opinion  

Tory debate over UK’s EU membership is barrier to stability

John Lappin

It is always difficult when the political world impacts on business and thus on clients’ portfolios.

Ask any investment adviser and he or she is likely to say the biggest political risk we now face comes from Labour’s suggestion that it may price cap income drawdown.

This shows the workers’ party at its statist worst. It is an intervention that could well diminish rather than increase options for clients and certainly for the mass market.

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Likewise, advisers and indeed fund managers will not be fans of Labour’s plans to cap energy bills.

Once again, this would appear a rather clumsy way of intervening in a market. I have less sympathy in this instance for the boards of some of the energy firms, whose behaviour in the area of tariffs look pretty much like ham-fisted attempts to bamboozle their customers.

So perhaps we shouldn’t be surprised when that leads to a ham-fisted attempt to control prices.

A sensible politician would, in this instance, have beefed up energy regulation, and looked at ways to introduce more competitors to take on the big six. But that would not have garnered as many favourable headlines in this era of quick political fixes.

And yet for all its pro-business and indeed pro-investor credentials, one has to ask whether it is actually the Conservatives that present the biggest political or business risk over the medium term.

That surely comes from the risk of a ‘Brexit’ from the European Union (EU). Many believe we are likely to see two elections next year, which won’t help confidence either. The British people may speak and the British people may say, ‘We still can’t make up our minds.’

But if a victory of sorts for the right-of-centre parties emerges, then we move towards referendum territory, against a backdrop of some pretty vicious cuts that have yet to fall. (Well, on current plans, it’s that or tax rises.)

These could be very unsettling times indeed for the UK portion of portfolios.

What would be good to hear is an idea of how either the Conservatives or Ukip plan to govern during this period of uncertainty and in the event of an exit from the EU.

International capital certainly does not like such uncertainty as we saw with the nervousness surrounding the recent Scottish vote. Advisers and fund managers may wish to maintain studied neutrality on the issue of whether the UK stays in or leaves the EU, but I am not sure such a position will remain tenable.

You may, of course, believe that we need to leave the EU, as the core eurozone area becomes increasingly federal in nature even as it appears incapable of sorting out its economy.