I thought I’d wait until after the weekend to write a post about the implications of the UK election results. It’s not my place to write about the pros and cons of the election campaigns, although I will say that the alienation of the elderly and those who are parents by the Conservative’s campaign – which included a dementia tax and the withdrawal of school lunches – were almost tombstones in theirs. That is why there is no majority and we ended up with a hung Parliament.
If it’s not my place to delve into the politics, it is my place to talk about the ramifications for Brexit, FinTech and Britain’s financial system, and basically it’s good. The whole point of calling the election was to give the Conservatives a greater Parliamentary mandate to negotiate a hard Brexit. Theresa May believed the polls, and thought the election would result in a far stronger Conservative majority in the House of Commons. This would give her a much stronger position in Brexit negotiations, and would mean that she could force through unpopular policies in the EU discussion process.
If I lose just six seats I will lose this election and Jeremy Corbyn will be sitting down to negotiate with Europe: https://t.co/OwbfDseOJh
— Theresa May (@theresa_may) May 20, 2017
Instead, she returns weaker, diminished and with a hung Parliament. There is no strong and stable government. The difficult negotiation policies and hard discussions in the Brexit process, will now be tough and unlikely to succeed. Instead, the discussions will be softened and more conciliatory. That is why it is good because, with a split Parliament, the next two years will be far more open to embracing EU requests.
Equally, there can be no postponement of the March 29, 2019 Brexit date. Article 50 was triggered on March 29, 2017, with the belief that a hard Brexit could be forced through. That will not happen now. Bearing in mind that the majority of Parliamentarians are pro-Europe, it means that leaving the free movement of goods, workers, people, services and capital will be unworkable. Labour, with a stronger representation, can now vote down many of the policies supported by the Liberal Democrats, Scottish National Party and a minority of Conservative rebels.
In other words, Theresa May’s election gamble and loss means that the Brexit process becomes far less radical. The only reason she called the election was to increase the Conservative majority, and give her a stronger hand to force through a hard Brexit. Now she has a far weaker hand, and cannot force through anything.
For the UK financial system and London’s FinTech scene, I’ve always said that we don’t know what Brexit means until the negotiations begin. The negotiations will now begin, and we have no idea what will happen. Some will put pressure for a second referendum and trying to bring back the Remain campaign; others will push for a soft Brexit, and capitulating to many EU demands; others will wish for a hard Brexit, but this is not going to happen.
The bottom-line for the UK FinTech scene is that it will stay strong and stable. I don’t see all the firms that are based here moving away and, more importantly, the talent pool is still here. The ability to find technologists, working alongside financiers and regulators is still strong and stable here. That has not changed and will not change until the Brexit process is clear.
When will the Brexit process be clear?
A Conservative majority would have made that easy to see. A split Parliament makes this unclear. We will just have to wait and see. However, being an optimist, the one thing that may be the silver lining here is that no strong Conservative Parliament means no hard Brexit. A soft Brexit is far more likely here, and a soft Brexit means retaining access to the Single Market and the free movement of people.
Thank you Theresa May.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...