The Coalition

Nearly a week after the UK went to the polls the country woke up to a new Prime Minister. Backroom negotiations have concluded in a coalition government between the Conservatives and Liberal Democrats ushering in a new era for British politics.

Prime Minister David Cameron, on the steps of his new home, said that his administration would focus on “rebuilding family, rebuilding community, above all, rebuilding responsibility in our country”. He went on to say, “I think the service our country needs right now is to face up to our really big challenges, to confront our problems, to take difficult decisions, to lead people through those difficult decisions so that together we can reach better times ahead.”

This is an approach that many business leaders should be taking to deal with uncertainty in their organisations.

It has been 36 years since the United Kingdom has experienced a coalition government. This unfamiliar territory is throwing uncertainty into a precarious economic recovery. A week of unclear electoral results caused concerns, especially to the business community. The day after the election, markets around the world tumbled and sterling depreciated significantly, signs of waning confidence. Although the hung parliament caused volatility, the real concern comes from the systemic risk caused by Greece and the further EU financial crisis.

However, countries the world over have coalition governments and prosperous economies. Business leaders have been left asking what the impact of this new government will be on business and the economy. Members of the Community offered their thoughts on the results.

Sir Brian Bender, former Permanent Secretary:

“What business most needs from the new Government is decisive action on the budget deficit. Leaders of businesses whose customers are Government will need to be alert to the opportunities and risks resulting from that action. The prizes will go to those who can offer more for less for the taxpayer.”

Bryan Hughes, Chief Executive of Eversheds:

“The pound and euro are under pressure as a result of the fallout from the sovereign debt crisis. The UK needs to deal with its massive state debt, but political deadlock at Westminster will inevitably mean a delay and therefore more pain later on. Whatever happens over the coming days and weeks, it’s clear that the new government will need to take appropriate steps in order to reduce the deficit, but if they cut too deep the economy is in danger of going in to meltdown again. Clearly however, further cuts are required than have been detailed in the manifestos.”

Deborah Loudon, Head of Government Practice Group, Saxton Bampfylde:

“The face of politics has changed in ways we do not yet understand but which are enthralling the nation and suggesting that engagement with the process may yet overcome the cynicism provoked by the expenses issue. Many activists who have been out campaigning report a passionate engagement with policy issues on the doorstep, right across the political spectrum. Those approaching or seeking to influence government in the immediate future will need to do more homework than before and understand the likely shifts of policy as compromises between the new partners are hammered out. An optimist might say that reliance on solid and objective evidence will become more powerful as the ability to rely on agreed party policy diminishes for ministers.”

Steve Cooper, Managing Director, Barclays Business:

“While business owners and the wider business community may be getting used to a new political environment, it is important not to get distracted from the day to day basics of running a business. Getting and fulfilling orders, securing cash flow and keeping close to customer needs would be my advice today just as much as last week. The UK economy needs a strong business sector even more than ever and in my opinion, all political parties know they have a responsibility to keep momentum of the improving economy.”

Siva Shankar, Corporate Finance Director, Segro:

“The Greek crisis, contagion fears, ‘Lehman’s’ memories, and the brutal punishment meted out by nervous markets to ‘unstable’ countries, will all create a sense of urgency for a coalition government and business to work together on common ground to put the UK on a politically stable and fiscally sustainable path. Multi-national corporations are already well experienced in dealing with coalition governments across many of their geographical territories, and will quickly adapt to a coalition governed environment in the UK.”

Clive Ansell, Senior Advisor to the Board, Royal Mail:

“My message to business leaders is to accept that business and detailed business concerns will be low in the balance of priorities. In the business world the equivalent would be getting an M&A team to focus on BAU. So, aim your requirements at core areas of agreement between the parties, and try to go with the grain of policy. If you have to challenge policy, do so in a way which demonstrates that it’s a value-added initiative. There will be little time, appetite or capacity for detailed political interventions unless there’s a clear macroeconomic or employment upside.”

If you would like further information on today’s topic please look at the Insight pages on the website. Why organisations need to engage with the government provides advice on how to deal with the government.

Please get in touch if you have any comments about the issues in today’s update.

I hope to see you soon

Matthew

www.twitter.com/criticaleyeuk

 

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