The surprise U.K. election result is likely to cause mayhem across global financial markets and could delay Brexit negotiations, say business leaders.
British Prime Minister Theresa May’s decision to hold a snap election backfired as the Conservative Party lost its majority in the U.K. parliament. While it remains the largest party, the Conservatives will now have to rely on other parties to pass motions through parliament.
The British pound fell sharply with the news of the result, dropping 2 percent against the dollar on Friday morning and down 1.7 percent against the euro. London’s FTSE 100, however, opened with a 0.9 percent rise, the BBC reported.
Nigel Green, the chief executive of financial services firm deVere Group, said the election had put May’s job on the line and produced “yet another enormous storm cloud of uncertainty.”
“We’re entering into a perfect storm of chaos and the uncertainty is set to unleash mayhem across global financial markets, at least in the short term, as they react to the growing question marks hanging over the British parliamentary landscape,” said Green in an emailed statement.
The result of the election —which May called in April with the goal of increasing her parliamentary majority—comes less than two weeks before Britain enters crucial talks with European Union leaders regarding the U.K.’s exit from the political and economic union.
Some business chiefs and investors are suggesting that the result could derail the negotiation process, while others predict that it will result in a softer Brexit, perhaps with the U.K. remaining in the customs union.
The most obvious conclusion of the election is “the likelihood of the U.K. needing to request a delay in the Brexit process has risen substantially, given the chance that political developments in the U.K. disturb what is already a time-compressed process,” said Malcolm Barr, economist at JPMorgan, in a research note reported by Reuters.
The British Prime Minister triggered Article 50 of the Treaty of the European Union on March 29, starting a two-year process by the end of which the U.K. is supposed to have extricated itself from the EU.
Liberal Democrat former business secretary Vince Cable, who was elected to his southwest London constituency of Twickenham, said young people “who felt cheated out of their future because of the Brexit vote” had made a point in the election. “This means we will have to look at this again as Brexit is approached and the extreme-UKIP type of Brexit this government has put on the cards,” said Cable. UKIP is a right-wing British party that campaigned to leave the EU.
Adam Marshall, the director of the British Chambers of Commerce, said a functioning government must be the “immediate priority,” but suggested that Brexit talks would likely suffer a delay.
“No business would walk into a negotiation without clear objectives, an agreed starting position, and a strong negotiating team. It is hard to see how Brexit negotiations could begin without answers on these important questions,” said Marshall.