UK hung parliament leads to slump in business confidence says IoD

Out-Law News | 12 Jun 2017 | 2:09 pm | 1 min. read

The result of the UK general election last week is a significant concern for businesses with many UK companies pessimistic about the country's future, according to a survey by the Institute of Directors (IoD).

Businesses responding to an IoD poll immediately after the election said the uncertainty caused by the result was a concern for the UK economy. Around two-thirds (65%) of respondents said the hung parliament was a significant concern and another 27% described the result as a “slight” concern.

Pessimism over the UK economy was also high with 57% of businesses “quite” or very pessimistic, up 20 percentage points from the IoD's last survey in May. However companies were much more confident about their own business with 40% saying they were optimistic about their organisation's future in the next year.

UK economic conditions was having a negative impact on business for 53% of respondents and the uncertain trading status with the EU impacted 46% of companies in a negative way.

Accordingly the most important policy area for businesses is trade with the EU, although significant numbers said education, skills and training and modernising infrastructure were also key policy areas which the new government needed to focus on.

Last week EU law expert Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said companies should not hesitate to prepare for a post-Brexit UK despite the uncertainty.

“Those adjusting their business to prepare for a post-Brexit UK should continue as the risk of scrapping plans completely could prompt lengthy and costly delays when negotiations finally do begin,” said Lougher.

On Brexit negotiations specifically, more than half the respondents said the government needed to reach swift agreement on rights and entitlements for UK citizens in the EU and vice-versa.

Despite the uncertainty caused by the election, only 23% of companies want another round of voting this year. The majority said another general election in 2017 would be somewhat or very unwelcome.

IoD director general Stephen Martin said the minority Conservative government should address the needs of business and discuss the economy “urgently”.

“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,” Martin said.