June 9, 2017 – Editor’s note: U.K. Prime Minister Theresa May’s election gamble failed badly as her Conservatives lost 12 seats, leaving them with 318, shy of a majority. It was a stunning loss for a party earlier projected to gain dozens of seats. Without a majority, the Conservatives will have to rely on another party to govern – known as a hung Parliament. If they’re unable to forge a coalition, rival Labour leader Jeremy Corbyn – whose party gained 31 seats – would be able to give it a go. We asked two experts to offer their insights on what Americans should make of the election and its results.
Tories’ growing populism begets a power struggle
Charles Hankla, George State University
The results of this election show how similar, and yet how different, British politics are from what is happening in America.
As in the United States, there has been an explosion of populism in Britain, most recently evidenced by the Brexit referendum. This new political force is translating into less liberal policies from the major parties.
In continental Europe, the new populism is mostly embodied by the resurgent far right. But in Britain, as in America, it is being filtered through the existing two-party system – though the U.K.‘s smaller parties do complicate the electoral map.
To accommodate the political winds, May and her Conservatives decided to shift their electoral strategy away from Margaret Thatcher’s pro-market economic approach toward a greater focus on immigration, security and economic nationalism.
The American left, like its British counterpart, has also become increasingly skeptical of unbridled markets. But among Republicans, a traditional hostility to “big government” makes pro-worker redistributive policies, some of which the Tories have adopted to win votes, hard to stomach. For this reason, populism on the American right has mostly taken the form of protectionist and anti-immigrant policies, as embodied by Donald Trump.
Yesterday’s results were devastating for May and indicate that the Conservatives were ultimately unable to balance their new populist message with their traditional support for neo-liberal policies.
Corbyn, for his part, will use this unexpected victory (of sorts) to solidify his hold over the Labour Party and to move it further to the left.
It remains to be seen whether the election will result in a minority or a coalition government, or whether the parties will be well and truly deadlocked. Whatever happens, the British electorate, like its cousin across the pond, has shown itself to be highly polarized.
Still, at a minimum, Britain’s parliamentary structure, along with the ability of the Labour leadership to co-opt disillusioned voters, seems to have spared Britain the fate of America – the takeover of government by a populist insurgent.
For US companies, it’s business as usual
Terrence Guay, Pennsylvania State University
So now that we know the results, what are the implications for U.S. business interests in the U.K., America’s seventh-biggest trading partner?
May took a calculated political risk and lost. While the market reaction has been severe, with the pound plunging, it’s nothing new to companies, which take calculated risks like that every day – some pay off and some do not.
So first of all, U.S. corporate executives will need to take a deep breath. Assuming a combination of other parties do not cobble together at least 322 seats – despite winning seven seats, Northern Ireland’s Sinn Fein will not send MPs to London – the Conservatives will dominate a coalition government and have considerable sway over policy.
This means a “hard Brexit,” as outlined by May in January, and as seen in the European Union’s tough negotiating guidelines, is unlikely to change. But this is what most U.S. companies have been planning for anyway since last June’s Brexit vote. Many companies, particularly banks and financial institutions, are already planning to move some of their U.K. operations to other EU countries to take advantage of the single market rules.
This process will continue no matter who’s in power, since only the low-polling Liberal Democrat and Green parties promised a Brexit revote.
Second, a weakened Conservative Party will need more foreign friends, and that includes U.S. companies. Since Brexit, some foreign businesses have threatened to downsize or close their U.K. operations as leverage for obtaining government subsidies. Expect more companies to use this strategy with a weaker U.K. government.
As I argue in my recent book, the business environment of Europe is much more than the U.K. market, and U.S. companies have become increasingly aware of this since Brexit.
In other words, it’s business as usual, and that means the continued segmenting of companies’ U.K. and EU strategies, regardless of who is governing in London.