Westminster impasse over Brexit has come at just the wrong time
Ongoing political turmoil surrounding Brexit has been harming the UK economy for at least a year, with data pointing towards a significant squeeze on growth in recent months.
Morning Wire recently called on MPs to consider this impact seriously when pondering their actions during the current constitutional crisis. So much for that.
Investment decisions put off due to intense political uncertainty are sometimes simply deferred until the picture clears, but with little sign of any such eventuality in Brexit Britain, there is a serious danger that many never materialise at all.
Meanwhile there is lingering doubt over the legal status of various financial contracts should the UK crash out of the European Union without even a transitional agreement on 29 March.
Little surprise, therefore, that business and finance groups let rip last night.
“Financial stability must not be jeopardised in a game of high-stakes political poker,” blasted Canada, after Theresa May’s deal with the EU was voted down in the most severe parliamentary defeat ever suffered by a Prime Minister.
The Institute of Directors slammed “the collective failure of our political leaders” and asked: “how are businesses meant to prepare [for Brexit] in this fog of confusion?”
Such exasperation is understandable and, to make matters worse, comes amid a gloomy global economic background.
Indeed, it would be wrong to assume that Brexit is the sole cause of worries in the City today. A wave of bearish stories since the start of the year remind us of life beyond these shores: a near-recession in Germany, a sharp slowdown in China, a debilitating trade war between the governments of the world’s biggest two economies.
A survey of investors by a top investment bank yesterday revealed the most pessimistic outlook for the global economy since the 2008 crisis. Following an historic bull run in the markets, and several years of steady (if uninspiring) growth, dark clouds now dwell on the horizon.
Further political drama surrounding Brexit is inevitable, but however it pans out it is crucial that leaders in both Whitehall and Brussels ensure that the potential for financial shocks come 29 March is minimised before it jumps right to the top of investors’ already-extensive lists of concerns.