The 2017 UK General Election has resulted in a hung Parliament with no single party holding a majority. This means that the passing of laws will have to be achieved through the brokering of deals or the formation of a coalition – much like the Conservative-Liberal Democrat coalition of 2010-2015.
Enrique Garcia is a consultant for ELAS specialising in employment law. He takes a look at what this result means for businesses. At this early point, it’s not yet clear what deals could be formed and what concessions need to be made to forge a deal, or even if there will be a deal at all. Whilst it is likely that the Conservatives will seek the support of the DUP in Northern Ireland, it is not clear at present whether this will be a coalition or if the DUP will choose to support, or not support, the Conservatives on a vote-by-vote basis in the House of Commons. There is also the chance that the Conservatives will attempt to go it alone, forming a minority government. Likewise, Labour has already said that they are ready to form a minority government if the Conservatives are unable to do so. If it becomes clear that the Conservatives are unable to form a government and Theresa May resigns, then Jeremy Corbyn will become the prime minister.
Parliament is due to meet for the first time on 13th June so the Conservatives will need to have a plan in place by then. The next big date is 19th June, the date that Brexit talks are supposed to start as well as the Queen’s Speech. This is the big test that will show if the government has enough votes to get its programme of proposed new laws passed. Accordingly, it is unclear what this means for business and employment law. It is not clear what policies the Conservatives will need to drop in order to get the DUP on side or whether they will continue their policies in full and hope to garner support from other parties in order to squeeze them through Parliament. Despite the political excitement as how this will pan out, for business and employment law the future is uncertain and quite literally anything can happen.
Employment and reward expert at Pinsent Masons, Graeme Standen, said: “With the Conservatives the largest party, but not clearly returned to power, the future of corporate governance requirements for FTSE companies is a little less clear than it would have been with a Conservative majority. If they can form a minority government, and are able to give this topic parliamentary time, these proposals could well attract cross-party support. “We can expect proposals to introduce “strict” annual shareholder votes on executive directors’ remuneration packages, possibly taking effect from 1 October 2018. This would involve a substantial reform of the current rules and could be difficult for companies to implement, so further consultation seems likely.
“FTSE companies are also likely to be required to report each year the ratio of executive director total pay to the UK workforce average. While more practical than the original proposal to disclose a CEO to global workforce median pay ratio, the amended proposal seems likely to have a stronger, and potentially difficult, interaction with the new UK gender pay gap reporting requirements (because pay gap reporting is based on gender differences in the four quartiles defined around the UK workforce median). The Conservatives also proposed to make pay gap reporting more detailed, and extend it to cover ethnic diversity as well as gender, which other parties are likely to agree with. Finally, FTSE companies will probably be required to adopt one of three approaches to strengthen employee representation in the boardroom.”
David Brooks, Technical Director at Broadstone says: “One thing that investors and the pensions industry do not like more than anything is uncertainty. The General Election result of an hung parliament gives us just that in spades. After the 2015 election and 2016 Brexit referendum our ruling classes seem to be on an annual reboot cycle which will see more resignations, renegotiations and reshuffles as the UK tries to work out how it wants to be run for the next five years.
“Making predictions is a fools game but what will seem likely is a Conservative government bolstered by the DUP. We know from the DUP manifesto that they support the triple-lock and universal benefits. This will mean this form of coalition would preserve the triple-lock. If the other parties can come together to create a loose coalition we would have a chocolate box of pension policy ideas to choose from – the triple-lock would almost certainly survive again. It’s a bit like the Strawberry Cream. However, for all this talk of the triple-lock it is likely we’ll have another election before even the next state pension increase is given, making any understanding of what the future looks like extremely difficult to predict.”
“Wider pensions policy decisions will likely be delayed until a concrete government can be formed. This could result in a period of little intervention from Government. While many will welcome this, there is still work to be done in the UK pensions system to ensure auto-enrolment works and any bolstering of TPR’s moral hazard powers to protect members of DB schemes should not be allowed to drift. A serious and committed Pensions Minister is needed to see these projects through.
“Trustees and employers with DB schemes may have been hoping for a clear victory, one way or the other, to give some certainty over the medium-term so that the right conditions can result in an increase in interest rates and a reduction in the size of their pension scheme liabilities. However, what seemed like a blip is becoming the new normal. The universal barometer of the markets though is the pound, and this has fallen on this uncertainty and investors will likely to see more short-term volatility over the coming weeks as what our future looks like becomes more clear.”
The Forum of Private Business is calling more loudly than ever for the UK’s politicians to recognise that the economic strength of the UK is reliant on the country’s five million small businesses.
Chief Executive of the Forum, Ian Cass comments, ‘The voice of small business has been completely ignored during the election campaign, with both Theresa May and Jeremy Corbyn both demonstrating that they have no real understanding of the critical role played by businesses to the importance to the UK, both in economic contribution and job creation,’
Facing a period of increased instability and uncertainty that a hung parliament will once again bring to the business community, Ian Cass is pushing for business to be put at the heart of government, with a Small Business Minister sitting at the Cabinet table and having teeth.
‘Businesses are tired of being paid lip service to. We have over five million business leaders in this country. Young and old, North and South, Remain and Leave, who have their feet firmly on the ground and need, once and for all, to be taken notice of.
Commenting on the unexpected result of the UK General Election, Samantha Hurley, Director of Operations at The association of Professional Staffing Companies (APSCo), comments; “It seems that Theresa May’s gamble on calling a snap election hasn’t paid off and it is unfortunate that this result does not offer the level of stability that the UK desperately needs. In light of this uncertainty, the next Government should be especially careful to avoid knee jerk changes to taxation, employment regulation or visa controls associated with our exit from the EU.”
“The impact of this result on both the permanent and flexible labour markets has the potential to be significant. Ever since the phrase ‘gig economy’ was coined, media attention has consistently focused on lower skilled and lower paid workers and we are absolutely determined to ensure that the new Government recognises that professional independent flexible talent is not only a completely distinctive group within the gig economy but that it also has a critical role to play in the future success of the UK plc. We hope the new administration will be open to working closely with us to ensure collateral damage is kept to a minimum.”
David Lamb, head of dealing at FEXCO Corporate Payments, comments: “The Pound is paying the price for Theresa May’s failed gamble – and after a 2% fall overnight it remains deeply vulnerable. “The Prime Minister had hoped to begin Britain’s Brexit negotiations this month with a thumping mandate and a spring in her step.
“Instead she will do so walking on eggshells and looking nervously over her shoulder for cabinet members wielding knives. In short, everything the markets didn’t want from Britain’s Brexit negotiators. While it’s possible that the ultimate Brexit deal could be a touch softer than that promised by Mrs May, for now this remains too theoretical to have much bearing on the markets. The blunt truth is that Brexit uncertainty is back with a vengeance – and the Pound is once again in the firing line. Nearly a year after the Brexit referendum result plunged sterling into its prolonged purgatory of volatility, there is no end in sight.”
