What effect could the general election have on the UK?
Less than a year on from the UK’s landmark vote to leave the European Union, it looks as if another big vote could be set to shake up the political and business landscape. Our attention in the past month or so has been turned to the looming general election, with all parties out to score points on a plethora of policies, ranging from education to taxes. With the vote this week, SinoScan have been looking to cut through the noise and outline just what affect the winning party could have on the UK’s future.
Current trade with EU countries
When taking a look at current trade figures between the UK and the EU, it’s surprising to see that although trade with the EU is needed, it has grown to be less so recently. At the turn of the millennium, the proportion of UK exports to countries inside of the EU was closer to the 55% mark, but has since fallen to around 44% in 2016. However, while the figure has reduced, exports were still worth £240 billion to the economy that year.
In terms of imports, around 53% of goods and services coming into the UK were from other EU countries in 2016. When all of the UK figures are taken into account, this suggests that we currently run a trade deficit with the union, as they sell £60 billion more to us than we sell to them.
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Current trade with non-EU countries
As a member of the World Trade Organisation, the UK has benefitted from the ‘Most-Favoured Nation’ policy, which prevents countries in the group from discriminating between each other in trade deals. The organisation has also allowed Britain to lower the barriers to trading globally, which could be something to rely on if deals with the EU turn sour.
As the two-year clock continues its countdown towards the Brexit ‘deadline day’, there have been some countries who have expressed positivity of a lone Britain to trade with. China and Qatar are just some of those who have had meetings with the government in recent months.
Currently, only two out of the top ten UK trading partners are from outside the European Union. The US is the largest, accounting for 14.8% of exports, worth almost £47 billion. This is followed by China, who account for 4.4%, which is worth £13.9 billion.
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A Conservative win
Most speculative viewpoints suggest that a Conservative win would be the safest outcome for businesses in the UK. They have been the more forthcoming of the parties regarding what they hope to achieve from Brexit, but have expressed that they aren’t afraid to walk away from ‘a bad deal’ on the negotiating table. Some of Theresa May’s 12-point plan for negotiations include taking control of laws, controlling immigration and ensuring the UK remains the best place for science and innovation.
When it comes to trade, the prime minister has held talks with countries like China, where discussions have taken place on agreements like the ‘Belt and Road Initiative’. As discussed in our previous blog, plans are for the initiative to strengthen trade between the UK and China and make it easier for the two to complete business deals.
A big part of campaigning amongst the parties this year has surrounded corporation tax. In their manifesto, the Conservatives have pledged to reduce the tax from 19% to 17% in a bid to allow Britain to be a competitive hub for global businesses to work and invest. Hopes are that this will also encourage more UK companies to export their goods and services.
A Labour win
At first, it was widely considered that this election may have come around a little too soon for the Labour Party. However, polls in last week or two have suggested that this is far from the case, with the party quickly catching up to the Tories.
Standing on the opposite side of the fence to Theresa May, Jeremy Corbyn doesn’t believe in the ‘no deal is better than a bad deal’. In fact, this is considered to be the worst possible outcome for Britain, where it will only damage the economy and any future trade relationships with the rest of the world. Instead the party hopes to negotiate transitional agreements to avoid a ‘cliff-edge’.
Labour has pledged to develop a strategy that is ‘pro-trade and pro-investment’. They believe that the UK’s future prosperity depends on minimizing tariff and non-tariff barriers, as well as bringing forward an integrated trade and industrial strategy that ‘boosts exports, investment and decent jobs’.
In comparison to the Conservative’s cuts in corporation tax, Labour are planning to raise it from 19% to 26% by the end of the decade. According to the party, savings in the budget generated by this will be used to fund the NHS and abolish university tuition fees. A number of businesses believe that this, along with the proposed increase to the minimum wage, will see many struggle to grow during turbulent times.
Until the results of the election are announced, it can be hard to predict what lies ahead in the future. Each party has evidently varied views on how the UK will conduct itself during Brexit negotiations and how they see the country progressing in the years to come. What we do know is that preparation is key, and now is a better time than ever for businesses to plan ahead for all eventualities.