UK businesses are reporting a dramatic drop in confidence and huge concern over political uncertainty as a result of last week’s hung parliament election result.
A poll of 700 firms by the Institute of Directors in the wake of the Friday (9 June) result, suggested company directors are keen to see quick agreement with the European Union on transitional arrangements surrounding the UK’s withdrawal, and clarity on the status of EU workers in the United Kingdom.
The overall priority for the new government, according to IoD members who have taken the survey since noon on Friday, must be reaching a new trade deal with the European Union.
On the domestic front, work to deliver a higher skilled workforce and better quality infrastructure is considered vitally important.
But the firms polled see no clear way to quickly resolve the political situation, and feel a further election this year would have a negative impact on the UK economy.
Stephen Martin, director general of the Institute of Directors, said it was “hard to overstate what a dramatic impact the current political uncertainty is having on business leaders”.
“The consequences could – if not addressed immediately – be disastrous for the UK economy.
“The needs of business and discussion of the economy were largely absent from the campaign, but this crash in confidence shows how urgently that must change in the new government.”
Mr Martin said it was “disheartening” the prime minister focused on sharing prosperity in her Downing Street speech, rather than on creating it in the first place.
“With global headwinds and political uncertainty at the front of business leaders’ minds, it would be wise for this administration to re-emphasise its commitment to a pro-business environment here at home,” he said.
“If we do indeed see a minority government, both sides of the aisle must swallow their pride and work on a cross-party basis on the most important issues.
“The last thing business leaders need is a parliament in paralysis, and the consequences for British businesses and for the UK as an investment destination would be severe.”
Results of the IoD poll on Friday found there has been a negative swing of 34 points in confidence in the UK economy from the trade body’s last survey in May.
While 20 per cent of the firms polled are optimistic about the UK economy over the next 12 months, some 57 per cent are now either quite or very pessimistic – a -37 ‘net confidence’ score. This compares with May, in which 34 per cent registered their optimism, and only 37 per cent reported pessimism – just -3.
Asked to choose three areas of Brexit negotiations which should be prioritised by the new government, more than half – 58 per cent - chose agreement on rights and entitlements for EU citizens in the UK and vice versa.
In joint-second, negotiating an early agreement on transitional arrangements and securing ‘zero for zero’ tariffs were both chosen by 38 per cent of business leaders