At last week’s Labour Party conference in Brighton one of the more eye catching stories to emerge was the fact that Shadow Chancellor John Mcdonnell was “wargaming” a possible run on the pound if Labour were to be elected. Not to be outdone, the Conservatives responded with a conference so catastrophic that the pound tumbled 2.5 per cent against the dollar this week, in its worst weekly performance since, well, this time last year when the previous Conservative Conference managed to push it down by 4 per cent.
As you would imagine, the atmosphere amongst business attendees of both conferences was pretty far from upbeat. The delegates at the conference of the party which finished in first place at this year’s election were in an almost uniformly glum mood whilst those at the conference of the party which finished second were mostly energised and optimistic. But, having spent much time over the last two weeks with the representatives of UK PLC at both events, it was striking how neither left them exactly fired up. As one put it “we appear to be being offered Singapore-Upon-Thames or Stalingrad-Upon-Thames and we don’t really want either.”
That is unfair to both parties. Labour’s official programme is far more “mainstream European social democracy” than “Stalingrad,” whilst the Conservative vision is much too unclear to really be described as anything as coherent as “Singapore.” Theresa May after all began the week with a claim that only she could defend “free markets” and ended it with a pledge to cap energy prices.
Brexit, of course, dominated much of the business discussion. Labour conference saw a much higher level of business engagement than in recent years. This seemed to be driven by dual factors. First, the belief that Jeremy Corbyn may indeed be forming Britain’s next government. And second, that given Labour’s ambiguous messaging, few seemed to have any idea exactly what that means for the UK’s relationship with Europe.
“Theresa May began the week with a claim that only she could defend “free markets” and ended it with a pledge to cap energy prices”The overall sense I got from business in Brighton was that if Labour were prepared to stay in the European Single Market and Customs Union then firms could, not exactly happily, put up with quite a lot. The Labour leadership may be unwilling to accept that deal but not many business types seemed prepared to die in a ditch defending the utilities or rail companies and complaints about a marginally higher corporate tax burden were few and far between. Indeed one banker (only half-) jokingly explained how a programme of government-debt-for-equity-swap nationalisations would at least generate some fairly chunky fees for their sector.
In Manchester many politicians and, to be fair, some business representatives were keen to talk up the potential of “Global Britain” and the opportunities offered by new free trade deals once Britain regained control of trade policy from the EU. But, perhaps more quietly, many firms seemed far more focused on the potential loss of access to European markets than the chance to trade more freely in East Asia.
There was a certain sense of fatalism from many who had previously stressed the need to stay in the Single Market that this was now, it appeared, firmly off the table. The debate around the Customs Union was far more nuanced. One business representative noted that expressing a view on the Customs Union as an institution was now seen as quite “political.” So rather than talking about the bigger question of whether the UK should stay in it or leave, they had switched to talking about the elements of the current system of customs checks and clearances that they wished to retain.
The general sense from business on Brexit, at both conferences, was that a “cliff edge” outcome of exiting with no deal and under WTO terms was highly unlikely. The feeling was that this would be so disruptive and damaging that both sides would strive to avoid it. A transitional deal was seen as highly likely and it would almost be certainly be a transition that involved very little change for business and last for years rather than months. On the longer term the picture was, to use perhaps the most often used word in the Brexit debate, seen as “uncertain.” Views ranged from a “Canada” type deal covering mainly goods to a “Canada Plus” with something about services tacked on.
From Labour’s “prawn cocktail offensive” in the early 1990s until very recently, British business have found themselves in the pleasant (for them) situation of being courted by both major parties. This year the two main conferences offered them a choice of higher taxes and nationalisations or a clear pull back from economic ties with their largest trading partner. Unsurprisingly enough, they don’t seem to find either option especially appealing.
