Whether Theresa May will still be limping on as prime minister by the time you get round to reading this is anyone’s guess. After one of the most catastrophic election campaigns in history, the Tories remain in power, but their grip on government has been weakened. The City will be relieved about that, but only because Jeremy Corbyn is the alternative.
Still, May now needs to rebuild her relations with business. During the campaign her “Red Tory” strategy alienated many of the people who are her party’s most natural supporters. The prospect of Corbyn, with his hard-left agenda, taking control will mean most of the business and financial community now rallies to her banner, no matter how frayed it might be looking. But they should be telling her clearly what they expect from her government. Here are five places she could start.
First, it’s time for some stability. The last thing anyone wants is any more elections. There was the Scottish referendum in 2014, a general election in 2015, the EU referendum in 2016, and then another election in 2017. One a year is way too many. With the support of the Democratic Unionist Party, her government should have a workable majority to last for a full five-year term. With that in place, business will know what the future holds, and they can start putting plans in place. There has been enough disruption for one decade.
Next, get a deal done with the European Union. What we need most of all right now is a quick Brexit. If we make some big concessions on the budget – which won’t be especially painful – and on the rights of EU citizens, while asking for very little in return beyond tariff-free trade, then there is no reason why a headline agreement couldn’t be wrapped up by Christmas. Making sure everyone knows where they stand is more important than £10bn here or there on the exit bill.
Third, allow plenty of migration. Most companies can take leaving the EU in their stride, although a few, especially in financial services, will have to make significant changes. The migration targets worry them a lot more. They may well find they have too few people or the wrong sort of people. Huge chunks of the economy are dependent on cheap labour and changing that is not going to happen quickly. May should throw away the talk of immigration targets.
Fourth, deliver on corporate tax cuts. There is already a pledge in place to get the rate of corporation tax all the way down to 17%, one of the lowest levels in the developed world. Add in one of the lowest rates of capital gains tax for entrepreneurs, and Britain is becoming one of the most business-friendly countries in the world to base a company. May needs to make sure that commitment is honoured. Indeed, there would be a case for matching the 12.5% corporate rate in Ireland.
Finally, ease up on fiscal policy. There are already signs the economy is slowing down. Throw in the disruption of leaving the EU and it will be a miracle if the UK gets through to 2020 without a slowdown. Voters are fed up with austerity. It would be better to let the deficit creep up to 4% of GDP than see the electorate turn to the hard left. It is still not impossible for May to become a successful prime minister. However, she will need the support of business to do it – and she needs to do a far better job of winning their backing than she has done so far.