Business leaders fret over ‘cocktail of political risks’ as UK election nears

Larry Elliott and Jill Treanor in Davos
The Guardian
25 January 2015

Davos delegates fear possibility of minority government and second poll, as well as uncertainty over EU membership

The general election risks exposing the UK to a “cocktail of political risks” that could threaten growth and force the country out of the European Union, according to business leaders.

The growth of minority parties such as Ukip and the Greens and the fall in popularity of the Liberal Democrats are forcing bosses to prepare for the possibility that a second poll may have to be called months after the one scheduled for 7 May.

The Conservatives’ pledge to call an EU referendum in 2017 if they are in government is also causing anxiety. Doubts over Britain’s political future were voiced openly by executives at the World Economic Forum in Davos.

Speaking on the sidelines at the gathering of political and business leaders in the Swiss Alps, John Cridland, director general of the CBI, said: “Britain is no longer a two-party system, it is a six-party system, and it looks like it won’t be until 5am on the morning after the election until we know what the result is going to be. The UK could end up with a minority government and a repeat of 1974, when there were two elections in swift succession.

“The uncertainty of the result is what business is most concerned about. Back home most CBI dinner tables are discussing this issue.”

Cridland said he saw the election as being bookended by the referendum on Scottish independence last September, which was still having political ramifications, and a possible EU referendum. “Scotland, six parties, 1974 and Europe: this cocktail of political risks is what companies are focused on.”

Sir Martin Sorrell, chief executive of the advertising company WPP, said: “It looks like there will be a coalition government. It looks more likely to be a Labour-led coalition which we – business – may not like but may be the case.”

Sorrell said he was concerned about the possibility of an in/out referendum on the EU. “This would cause real uncertainty,” he said. “At best it would be neutral, at worst it will be harmful.”

The situation is also concerning leaders across the channel. Nicolas Moreau, a senior executive at the French insurance group Axa, said the UK election was even more significant than the one taking place in Greece on Sunday.

“This is the most important election of the coming year because depending on the outcome, whether there will a referendum or not, this could change Europe. Europe, without the UK, can be different. There is a huge challenge there,” he said. “I think that it would be sad to have the UK [leave the EU].”

George Osborne told Davos delegates that he hoped voters would recognise the Conservatives’ track record on the economy. The chancellor also said he wanted the UK to remain in the EU but with rewritten treaties and renegotiated terms.

Anne Richards, chief investment of Aberdeen Asset Management, said it was possible that there would be another election within 18 months. She said there was a “feeling we’ll have some sort of minority-led government and they will have to negotiate issue by issue vote by vote”, although a coalition was also possible.

Gary Cohn, boss of Goldman Sachs, told the BBC that the UK should remain in the EU. “I think that having a great financial capital of the world staying in the UK and having the UK be part of Europe is the best thing for all of us,” he said.

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