U.K. Election Result Piles Up Brexit Uncertainty for Business
Executives on both sides of the English Channel agreed on one big takeaway from Theresa May's failure to win a majority for her Conservative Party in the British parliament: Anything they thought they knew about the contours of Brexit is out the window.
"Nobody knows what this means for Brexit," said Richard Carter, U.K. head of BASF AG, attending an annual dinner in London for the German Chamber of Commerce Thursday evening, as exit polls indicated a so-called hung parliament. "This will have huge implications for Brexit."
Mrs. May's Conservatives still held on to more seats than any other party in the general election, but the British prime minister's failure to secure a majority--and the strong showing by Labour and the Liberal Democrats-- scrambles British politics just ahead of the start of negotiations over how the U.K. will exit the European Union.
The Tories now must secure parliamentary partners to govern effectively. Labour leader Jeremy Corbyn has called for Mrs. May's resignation and has said he would try to form a government, though Mrs. May will have the first crack at doing so.
For businesses confronted with Brexit, yet more uncertainty is a big worry.
The immediate political black hole at Westminster and the prospect of an unstable coalition or minority government in the midterm could raise questions about everything from the timing of the Brexit negotiations with Brussels to the possibility that the split with the EU might not even happen.
The pound fell late Thursday after exit polls predicted the broad outline of the election results. Analysts had braced for a wild ride in the markets should Mrs. May fall short. Despite the Conservatives' relatively pro-business stance compared with Labour, Mrs. May had also committed to a clean break from EU, something that has unnerved executives.
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 FTSE 100 index of blue chips, rose early 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 British vote.
Fabrice Brégier, Airbus Chief Operating Officer and President Airbus Commercial Aircraft said the company would take a "wait and see" stance. Airbus, which makes the wings for all its planes in the U.K. said it is focused on the long-term implications of Brexit negotiations, not 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. "We want to stay in the U.K. provided the conditions to work in and integrated organization are met," he said.
Airbus would have to reconsider its presence in the U.K. should a government impose tariffs on the shipments of plane parts between the U.K. and continental Europe, or hinder foreign employees from visiting Airbus's U.K. production sites, he said.
Still, Mr. Brégier struck an upbeat tone. "I believe there are solutions for all the elements I listed."
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, investors sold down shares by 2.7% early Friday. Rupert Murdoch and his family are major shareholders in Fox and News Corp, publisher of The Wall Street Journal.
Business leaders called for quick action in forming a government to limit uncertainty.
"With crucial Brexit negotiations coming up fast, in addition to the significant domestic challenges we face, the lack of a government with a majority undeniably creates uncertainty," said Stephen Martin, director general of the Institute of Directors, a business trade body.
Peter Toogood, chief investment officer at British investment firm Embark Group, called the night "a setback for Brexit as we are a long way from a strong and stable government."
Write to Nina Trentmann at Nina.Trentmann@wsj.com and Robert Wall at firstname.lastname@example.org
(END) Dow Jones Newswires
June 09, 2017 05:10 ET (09:10 GMT)