The impact of UK elections on SA economy

Written by Helmo Preuss

United Kingdom (UK) Prime Minister Theresa May’s gamble of holding a snap election on 8 June so as to secure a strong mandate to negotiate the UK’s exit from the European Union (EU) did not come off.

Instead of increasing the Conservative Party’s majority, which is what the polls at the time said would happen, she instead failed to get a majority and has to rule with the cooperation of the Northern Irish Democratic Union Party (DUP).

Her position as leader of the Conservative Party is under threat and even with the support of the DUP her working majority is only two seats. If she loses those in a by-election in the next five years if a Member of Parliament dies or resigns, then we could have another snap general election.

This uncertainty will have an impact on South Africa as the UK pound weakens against the rand and makes the UK less attractive as an export destination. The UK is South Africa’s largest source of overseas (not from Africa) tourists, while we exported R42bn to the UK in 2015.

In general uncertainty is bad for business as it makes the difficult choices regarding investment even more tenuous. If I invest in the UK with a view to exporting to the rest of the EU, will the UK still have favourable access once the Brexit negotiations have been completed within the next two years?

The Brexit negotiations start on 19 June and the reduced majority of the Conservative Party makes it more uncertain that the Conservative Party can steer the Great Repeal Bill through the UK Parliament in two years’ time.

Will I get back my money if I invest in expanded tourist facilities in UK tourist hot spots such as Cape Town or the Garden Route? In 2015, the UK sent 407,486 tourists our way. This is more than 100,000 more than second placed the United States at 297, 226 and third placed Germany with 256,646.

As the UK was part of the EU in terms of foreign trade relations, it also needs to negotiate bi-lateral trade relations with more than 200 countries, including South Africa. Where will the UK find the time and resources for this mammoth undertaking?  So even if the UK is able to conclude the Brexit negotiations within two years, when will it be able to turn its attention to South Africa? The uncertainty in terms of our trade relations is now even more uncertain.

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