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What does a hung parliament mean for SME businesses

It’s happened again, Britain has a hung parliament. Small business expert Carl Reader explains what the result of this general election might be for SMEs.

Last Week, the nation voted, and the result turned into a shock for many pollsters and bookmakers with no party taking an overall majority. This has left us with a hung parliament, which at the point of writing is looking to result in a Conservative/Democratic Unionist Party (DUP) agreement, either on a vote-by-vote basis or through a more formal coalition.

Many small and medium-sized business owners may be wondering what this means to them, and how they can prepare for any turmoil. The reality of the situation is that there is not much that can or should be done differently to what they were doing before. It is likely that in any minority or coalition government, compromises will need to be made and the political concessions that are made might disproportionately benefit those which help the largest party (in this case the Conservatives) when compared to the voter numbers or traditional influence of the smaller parties.

Casting a look back to 2010, we can see how a hung parliament resulted in several political negotiations, which damaged the reputation of both the Conservatives and the Liberal Democrats. Perhaps the most famous compromise was that on tuition fees, resulting in Nick Clegg having to perform a u-turn against his pre-election pledges. There were also compromises in respect of taxation on both sides, immigration caps, and spending cuts.

It can be argued that the coalition facilitated a more centrist government than had been expected. However, conversely it is no secret that the coalition was hindered by internal division. This was negated in the early days of the coalition with the introduction of senior Liberal Democrat politicians in ministerial positions – despite differences surfacing in the end.

Whilst there is no suggestion of a formal coalition between the Conservatives and the DUP, some compromises will still be made by both parties, and for businesses I believe that there are two key areas where we might see deviation from the Conservatives initial intentions.

The first area, and perhaps the key area for businesses, would be Brexit. It is likely that the DUP will want any terms of Brexit to be much softer, particularly in respect of movement and trade with the Republic of Ireland. Some will see this as a welcome introduction of checks and balances to the negotiations, whilst others may see this as limiting a strong negotiating position.

The second impact might be around tax. It is likely that any co-operating party, including DUP, would look to soften some of the Conservative social proposals, and the books will need to balance in some way. This might result in changes to the required tax receipts, and in turn the rates charged. On the other hand, the DUP might be keen to pursue the Conservative vision of low corporation tax, to remain competitive with the Republic of Ireland insofar as business taxation.

As you can see, a hung parliament raises far more questions than answers, and in business uncertainty can often lead to a downturn in output. All I can do is advise businesses to keep focused on what they can control, and work within the landscape that they find themselves in. In fact – keep calm, and carry on.

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