Although the surprise in Westminster at the Prime Minister’s previous refusal to go to the polls early was echoed in the Square Mile, news of a general election on June 8 was broadly seen as an opportunity to achieve greater certainty in talks with Brussels, reports The Telegraph.
The pound gained ground in currency markets as traders bet that a larger Conservative majority would give Mrs May a stronger hand to reach agreements with the EU over a longer period. Deutsche Bank said it was abandoning all its short positions on sterling in the light of a lower risk of economic shocks.
Sir Martin Sorrell, chief executive of the FTSE 100 advertising giant WPP, said businesses would be happy to accept seven weeks of campaign uncertainty in exchange for a stronger government. He said: “It obviously comes as a surprise given what Mrs May has said about not calling an early election. But when you think of the difficulty she faces in negotiating with the EU and the apparent divisions and weakness in the Labour Party you can see the logic.
“A snap election increases uncertainty for businesses but only until June 8 if the polls are to be believed. She has clearly calculated that, with the polls as they are, it is worth sacrificing seven weeks of negotiations with the EU to strengthen her hand.”
Peter Cruddas, the CMC Markets founder and former Conservative Party treasurer agreed. “My feeling is that the City expects she will win with a bigger majority,” he said. “If she does, she will go into Brexit in a stronger position. So if anything this clears up uncertainty which the City is always in favour of. “
Hedge fund manager Crispin Odey said Mrs May had chosen an opportune moment to go to the polls, as the economy’s resilience since the referendum was unlikely to last until 2020.
He said: “Economically speaking this is probably the best time she can do it but the current environment won’t last and things are bound to get choppier.”
Mr Odey said investors would see a new mandate for the Government as a chance to abandon “unaffordable” commitments in the last Conservative manifesto such as the “triple lock” on state pension rises and the guarantee to spend 0.7 per cent of GDP on foreign aid.
Businesses primarily sought to assess the impact of an early election on Brexit negotiations, however. City figures who campaigned for Britain to remain inside the bloc suggested a bigger majority would give the Prime Minister power to override backbenchers pushing for a “hard Brexit”. Some businesses fear exiting the EU without a trade deal would create an economic cliff-edge.
Sir Mike Rake, the chairman of Worldpay and former CBI president who was an ardent Remain campaigner during last year’s EU referendum, said: “If the election empowers the Prime Minister to negotiate a pragmatic Brexit with appropriate transitional arrangements it will be worthwhile.”
The snap election was not universally welcomed by business leaders. One chief executive of a major retailer said he struggled to understand Mrs May’s change of heart.
He said: “It’s clearly a last-minute thing. More political disruption is not welcome for us. I’m sure there is a good reason for it, it’s just the details of that aren’t clear.”
In the energy sector, which has been warned to expect Government action against price rises, there was confusion. Executives were left guessing whether changes could be pushed through Parliament before campaigning officially begins, or whether a crackdown could form part of the next Tory manifesto.