Weakening economic conditions, disagreements on free trade deals, a fractious electorate and the probability of a hung parliament looms large. What better set of circumstances for a newly appointed Prime Minister to call an election in order to gain a strong mandate from the public. This backdrop is not that of the forthcoming election, but that of the last December election held in the UK, back in 1923. Whilst Boris Johnson will be hoping for a different result for his government, both December polls are caused by turbulent political and economic circumstances. On this occasion Brexit has undoubtedly been the catalyst for discontent.
As a result of the lack of majority for Boris Johnson’s new withdrawal agreement, the EU granted a further extension until January 31st 2020. Thus, putting Brexit on ice until a new parliament has been elected. All parties will try to push the debate wider and show that current politics is more than just exiting the EU. However, it is difficult to see how discussions will not come full circle back to the unresolved Brexit situation. Especially when political parties are agreeing with rivals not to field candidates in certain areas, so as not to split the ‘leave’ or ‘remain’ vote. Whilst the polling results could yield a definitive choice for the direction of Brexit, the continued procrastination does little for positive business sentiment for planning or investment over the coming months. So, what other manifesto commitments in this election could impact businesses?
The most obvious battleground is taxation. Whether it is the taxes that directly impact the individual or those aimed at businesses, the effect they have on people’s finances can be a vote winner or loser. One area of taxation that may come under scrutiny is business rates, with the most recent rise seeing rate bills increase significantly. Any hint of change could pique the interest of business owners. The fairness of the scheme has also been called into question with some seeing it as more burdensome for firms with a physical footprint than those who largely operate online, which has predominantly affected retailers. Prompting calls for a digital services tax to target firms who have online sales, to level the playing field. Regardless of the tax in question each party will need the taxation system to fund future spending; spending that looks set to increase.
The latest data from the Office of National Statistics shows that the economy has grown at its slowest annual rate in a decade, narrowly avoiding recession levels in Q3 with GDP growth of 0.3%. Despite this, the unemployment continues its downwards trend from 3.9% to 3.8%, its lowest level since 1974. Yet the weakening economic conditions, both here and abroad, will be pounced upon during this election and fiscal expansion will be an overriding theme. The main political parties are all promising to invest in public services with health, education, the armed forces and infrastructure all set to benefit. Whilst this flies in the face of government policy of the past decade, politicians are pinning their hopes on a low-interest environment for the foreseeable future, in order to fund their pledges. As politicians prepare to go on spending, UK consumers and businesses are slowly reining in expenditure as caution prevails through this election period and the new year.
The in-tray of any incoming government will certainly be full, with Brexit having consumed a significant amount of parliamentary time in recent years. Businesses will hope that this election will expedite the Brexit stalemate, one way or the other and focus on domestic issues will gain greater prominence. We suggested in our prediction edition of The Occupier at the beginning of 2019, that Brexit trade wars and fear of recession would define the year. They have indeed done so and look likely to continue to take centre-stage well into 2020. If election fatigue has not set in already, then prepare yourself for 2020. We have the London Mayoral elections and UK local council elections in May, a long summer of wall-to-wall coverage of the US presidential election to look forward to, and, if the 1923 December election is anything to go by, we could have another UK General Election within a year!