As the elections loom large and the party leaders are, as we speak, on some campaign bus or another, covering large swathes of the British Isles in the desperate bid to win over last minute voters, how are financial services companies feeling about the outcome?
With this one likely to be “the most interesting” we’ve seen since the 1974 elections, what exactly are the biggest perceived threats and how could they change our banking landscape?
Earlier in the spring, Bloomberg surveyed a number of economists who said the biggest threat to economic stability was political uncertainty. Unlike the 2010 elections, which produced a coalition in just six days, this time investors are preparing for weeks
of wrangling and the prospect of a minority government propped up with smaller parties. None of this is good for the markets.
The European Referendum
Warren Buffet and other high profile investors have all come out to say that even the prospect of Britain leaving the EU is bad for economic recovery. A so-called Brexit could be the equivalent of economic hara-kiri. Not good for the banks.
The prospect of independence for Scotland has come back strongly as the campaigns have progressed and Labour’s Scottish prospects have deteriorated. The largest financial companies will be reassessing their options and, without any certainty that Scotland
will continue to be part of the UK, will be considering making strategic changes to their business operations.
The scrapping of non dom tax status
This could be a bad outcome for banking by-proxy, in the sense that it wouldn’t affect the banks directly but it would affect many working within the sector. It would mean that the UK – and London in particular – which has always been seen as a safe haven
for the wealthy – would become a much more hostile place to live for people working in the City.
Hiking corporation tax
The prospect of raising the main rate of corporation tax from 20 per cent to 24 percent doesn’t bode well for FS companies, particularly smaller, more profitable businesses.
The next few weeks will be very telling. Markets will rise and fall with every decision. FS companies will wait with baited breath to see what the future political landscape will hold and figure out how to best operate within it.