Belfast Telegraph

Clear result in general election 'would reduce sense of business uncertainty'

The UK economy could enjoy a business investment boost if the general election ushers in greater political certainty, according to an independent think tank.

The Centre for Economics and Business Research (Cebr) said a Conservative victory on June 8 could bolster economic and political stability, encouraging firms to invest and supporting economic growth.

However, it warned a stronger Conservative government could pose a threat to growth, if the party's moderate stance on immigration gives way to more stringent controls.

Scott Corfe, director of Cebr, said: "On the upside, an increased Tory majority, which would almost certainly be the result of an election, will increase economic and policy stability and reduce the current sense of business uncertainty.

"Increased certainty should feed through into higher levels of business investment, supporting growth in the short term.

"This is especially the case with respect to Brexit uncertainty, where Theresa May would have to lay out a more articulated vision to the electorate in the run up to the election.

"A colossal defeat for Labour, with the ousting of Jeremy Corbyn, would also allow a credible opposition party to emerge from the ashes and end the effective one-party state that the UK has become.

"This can only be good for the economy. Just as competition leads to better outcomes in business, so too does competition in politics, with credible political parties competing to deliver the policies which best guarantee prosperity for the nation."

He added: "There are some economic downsides to an early general election and a bigger Tory majority.

"While the Government increasingly seems to be taking a more moderate (and economically sensible) stance on issues such as immigration, reflecting the realpolitik and need for pragmatism post-Brexit, this could unravel.

"Hardliners within the Conservatives could give Theresa May a difficult time over any softening in stance towards Europe.

"And she could be pushed into taking a hard-line stance by the media during the election campaign - expect her to be repeatedly challenged on how and to what extent the Tories will reduce immigration."

The UK economy defied forecasts of a significant slowdown following the Brexit vote, with the Office for National Statistics confirming earlier this month that gross domestic product grew by 0.7% in the fourth quarter of 2016.

However, economists are forecasting growth to slow this year as consumer spending - a key driver of the British economy - is squeezed by rising inflation.

Howard Archer, chief UK and European economic at IHS Markit, said the economy's resilience has helped the Conservatives up until now.

"As the Prime Minister noted since the Brexit vote, the economy has held up well, employment has risen and consumer confidence is still relatively high.

"This is obviously helpful to the Conservatives on top of all the political considerations - not least their massive lead in the opinion polls

"But there are mounting signs that the economy's resilience is now fraying - with an increasingly squeezed and pressurised consumer being the main factor.

"Indeed, we suspect that GDP growth could well have slowed to 0.4% quarter on quarter in the first quarter of 2017 from 0.7% quarter on quarter in the fourth quarter of 2016 - and we believe a further slowdown is likely over the coming months as life gets harder for consumers and as business uncertainties mount in the face of weaker economic news and likely difficult Brexit negotiations coming to the forefront."

Popular