The UK pound value drops to a 7-week low after the unexpected British election result. Part of this drop was due to doubts cast on the Brexit talks timetable. However, EU leaders have stated they are ready to get started on the negotiations. If the UK is to leave they want it to be sooner rather than later.
Theresa May, the Conservative Party leader, has no option but to seek the backing of the Democratic Unionist Party (DUP) of Northern Ireland. This is strong right-wing political party, technically conservative, but with some extreme policies that clash with those of Theresa May’s party. It is against same-sex marriages and abortion, and wants soft borders with the South. The Tories will have some hard bargaining to face of they are to get DUP backing in parliament.
Some still have money on there having to be another general election later this year. This does not help the stability of sterling. Neither do the looming Brexit negotiations. The effect of the UK election in the US was minor, although shares in online businesses, including Facebook, Amazon, Microsoft and Apple fell significantly. This may have had little to do with events in the UK, since technology has been unstable for some time.
European leaders are prepared to stick to the Brexit timetable, negotiations for which start on 19th June. However, they fear that the UK election result makes a breakdown in talks more likely. The chaotic state of British politics at the moment, and a lack of strong and stable leadership, leads to uncertainty.
The last thing the EU wants is for talks to fail. It wants the UK out as soon as possible. This is partially so it can continue with a revised EU defense project that the UK had opposed. A breakdown in talks would also result in confusion in the marketplace. It could seriously affect the euro and the UK pound value.
There is also a great deal of money tied up in business real estate in London. Any delay in Britain’s exit from the EU could affect property markets and plans of large businesses to relocate elsewhere in Europe. Some may accelerate such plans if another British election is on the cards. If Labour won the replay, then personal income tax and corporation taxes would increase, putting an additional financial burden on firms currently located in the UK. Either way, some businesses may relocate regardless.
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