Apple Inc.'s CEO Tim Cook has said he's "very optimistic" about Britain's future outside the EU. Not everyone feels the same. Airlines, carmakers, and banks are all warning of business disruption and trying to plan for the worst. But a general election in June might be just the trick for bringing needed clarity to long-term U.K. investors.
An election would ideally bind Prime Minister Theresa May, who has somewhat softened her tone on Brexit of late, to a plan. She recently projected a more business-friendly stance while talking of a "deep and special partnership" with the EU, the possibility of a transitional Brexit arrangement to help companies adjust and the prospect of freedom of movement for EU nationals past the 2019 cut-off date. These are all incremental bits of good news for corporate leaders and investors if they form part of a coherent political blueprint for departure, rather than just being negotiating tactics.
A clearer Brexit strategy from the ruling Conservatives, backed by voters, might even do what triggering Article 50 didn't: bring back confidence in corporate spending. A Bank of England review of the first three months of 2017 warned that the fog around the U.K.'s future trading arrangements was holding back investment. A Deloitte survey in March found that CFOs were more upbeat than a year ago, but still expected a drop in capital expenditure, hiring and discretionary spending over the next 12 months. London's office construction projects have started to slow -- Apple's shiny new headquarters notwithstanding. There is value in certainty.
Financial markets are already pricing some of this in, with the pound hovering around a six-month high as traders anticipate a more solid Conservative majority and less chance of a messy crash out of the EU. They hope a bigger majority would dilute the power of parliament's hardline Brexiteers. True, there are downsides to currency volatility: the prospect of a stronger sterling sent the exporter-heavy FTSE 100 down 2 percent on Tuesday, but the index has still outperformed European rivals since the Brexit vote.
Is there a sense in which the notoriously risk-averse May is gambling here? It's hard to see how. Polls aren't perfect, but the Conservative lead looks pretty unassailable, as my colleague Marcus Ashworth has written. The strong performance of the British economy since June has dispelled fears of a big near-term shock to corporate profits or financial stability. Firms are clearly hiring. The jobless rate is at its lowest since 1975. If there is going to be a groundswell of anger or support for the opposition -- including the hapless Labour Party -- it's hard to spot.
Compare the risk profile of the U.K. with that of France, where there are four front-runners, each with a polling share not far from 20 percent of the vote and each with wildly different policies that could herald a range of outcomes from pro-business reforms to a costly exit from the euro zone. There's a path toward a more investor-friendly Europe this year, but France is the hardest bridge to cross.
CEOs have plenty of reasons to fear a more divided Europe. A U.K. general election isn't one of them.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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