U.K. Election Result Piles Up Brexit Uncertainty for Business -- Update
June 09 2017 - 10:16AM
Dow Jones News
By Nina Trentmann and Robert Wall
LONDON--Executives from around the world agreed on one big
takeaway from the Conservative Party's failure to win a majority in
the U.K. parliament: anything they thought they knew about Brexit
was out the window.
"Nobody knows what this means for Brexit," said Richard Carter,
U.K. head of BASF AG, who was attending a dinner in London for the
German Chamber of Commerce on Thursday, as exit polls indicated a
so-called hung parliament. "This will have huge implications."
Theresa May's Conservatives still hold more seats than any other
party after the election, but the prime minister's failure to
secure a majority--and the strong showing by Labour and the Liberal
Democrats-- scramble British politics just ahead of the start of
negotiations over the U.K.'s exit from the European Union.
Mrs. May said Friday she wouldn't step down as head of her party
and would attempt to form a minority government, relying on other
parliamentary parties to pass legislation. Labour leader Jeremy
Corbyn has instead called for her resignation and said he would try
to form a government--but Mrs. May has the first crack at doing
so.
For businesses around the world, Brexit had presented plenty of
uncertainty already.
Mrs. May called the election to bolster her thin majority and
strengthen her hand in negotiations with Brussels over the terms of
the EU divorce. Those talks are slated to start in June and Mrs.
May has telegraphed she is prepared for a clean break, even if that
meant exiting free trade and other agreements that have made
cross-channel business easier.
That "hard" Brexit stance has spooked investors and many
executives. Mrs. May's disappointing showing on Thursday could
soften her position, raising hope among business leaders her stance
may soften.
Ulrich Hoppe, director general of the German-British Chamber of
Industry and Commerce in the U.K., said he hoped the vote would
"lead to the country reassessing its position on Brexit."
The U.K. could become more open to compromise under a different
government, Mr. Hoppe said.
The chief marketing officer of Ryanair Group PLC expressed
similar hopes regarding Brexit on Friday. The airline, Europe's
largest by passenger numbers, has been an outspoken supporter of
the U.K. remaining in the EU.
"The U.K. election result shows that some people have changed
their mind on Brexit. I would love to see a soft Brexit back on the
agenda," tweeted Ryanair's Kenny Jacobs.
Some companies had already made concrete moves to protect
themselves from Mrs. May's vision of Brexit. Whirlpool Corp., for
instance, has said it would keep an English dryer factory open amid
a wider European restructuring, so that it can continue supplying
British consumers without having to worry about new tariffs or
currency swings related to Brexit. Whirlpool Chief Operating
Officer Mark Bitzer called it "industrial hedging" in an interview
in May.
Now, that move might seem hasty, if the Conservatives are forced
to water down their "hard" Brexit stance. A Whirlpool spokesperson
didn't immediately respond to a request for comment on Friday.
The pound fell Friday, continuing a decline from late Thursday
after exit polls indicated the likely election results.
The FTSE 100 index of blue chip companies rose Friday. The index
is made up of internationally focused firms, many of which benefit
from a weaker pound.
Other executives said it was early days in assessing the
consequences of the election.
Fabrice Brégier, Airbus Chief Operating Officer and president of
Airbus Commercial Aircraft, said the company would take a "wait and
see" approach. Airbus, which makes the wings for all its planes in
the U.K., said it was taking a long view, rather than focusing on
short-term currency fluctuations or even election outcomes.
"We will have to look at the long-term consequences of Brexit.
This is what it is about," Mr. Brégier told reporters.
One big loser on the London stock market were shares in Sky PLC,
the U.K.-based broadcaster. Rupert Murdoch's 21st Century Fox Inc.
has made a bid for the 61% of company it doesn't already own in a
roughly $14 billion deal. The transaction is contingent on U.K.
government approval.
Without a clear sense of who will be in power guiding that
decision and when it might materialize, investors sold down shares
by 2.7% early Friday. Mr. Murdoch and his family are major
shareholders in Fox and News Corp, publisher of The Wall Street
Journal.
Write to Nina Trentmann at Nina.Trentmann@wsj.com and Robert
Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
June 09, 2017 10:01 ET (14:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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