Theresa May – Is the new Prime Minister good for business?

Industry Insight July 15th, 2016
Theresa May – Is the new Prime Minister good for business?

Arthur looks at the short-term effects Theresa May’s election, and cabinet selection, has had and what it could mean for the long run

Everyone was surprised when, over a month before a vote was due to take place, Theresa May for herself to be the only candidate left in the running for the next Conservative leader and Prime Minister

Her only competition left after the MP votes (in which Theresa won almost 200 votes) suddenly dropped out after being subjected to a weekend of pressure from the world new, paving the way for Theresa May, the favoured choice, to take office early. David Cameron was all too happy to tender his resignation on Wednesday, allowing the Queen to appoint his successor and bring some stability to the chaos caused in the month after Brexit. Now, the new government has taken form, and a plan can be devised for how to deal with this new chapter in British, and European, history.

What does Theresa May mean for Britain, the market, the future of European connectivity? These are the questions which investors are pleading to have answered. They want a new period of stability which will allow for long-term strategies and an increase in confidence.

The Market’s Reaction

On the news that Andrea Leadsom was dropping out of the race, creating a situation in which Theresa May was the presumptive, the market responded positively. Whether this was more down to the ending of another unknown result or that the “safe pair of hands” was now to be Prime Minister, is unclear. But it is likely to be a combination of both. The value of the sterling, the real representation for a lack of confidence in the U.K. economy, increased by 0.4%. Both the FTSE 100 and 250 saw substantial increases, the latter by over 3% during the day. It appears that confidence is returning, with markets continuing to improve and the FTSE 100 returning to about 6600.

However, the value of the sterling is still at around $1.30 against the dollar, showing that there is still substantial improvement required to meet the levels pre-brexit.

Theresa May’s Cabinet

Theresa May has sent clear messages with her new team. Foremost, that she will take the party in a completely new direction. May will not carry on with the left overs of the Cameron/Osborne era – both of whom are now back-benchers. The new Chancellor is Phillip Hammond. The previous Foreign Secretary is also seen as a “safe pair of hands” in Westminster. He has already calmed tensions by discarding the necessity for an emergency budget. But he has recognised that he will not have an easy job in the upcoming months.

Theresa May has made sure to include some ‘Leavers’ in her cabinet, including Liam Fox, Andrea Leadsom and of course Boris Johnson, who takes over the Foreign Office. However, it is David Davis who is the most important ‘Leavers’ given office. He will lead the so-called ‘Brexit Office’ in government, helping to pave the way for the new era in British Politics

 

It appears that the U.K. economy will certainly benefit in the short run from the election of Theresa May’s experienced and “safe hands”. The new top team will focus on stability and clarity, things the markets desire a return to. The next step is to see how this highly experienced team are able to negotiate Brexit. It will be their legacy.

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