What does a hung parliament mean for the City? The dust is still settling, but commentators have been quick out of the blocks. Here is what they think.
City of London Corporation: We cannot risk harming financial services
City of London Corporation policy chairman Catherine McGuinness called for an “effective and secure” government to be formed as soon as possible.
“Markets do not like instability,” she added. "It is also important for the prospect of successful Brexit negotiations that we have certainty in the political system.
“In these negotiations with the EU we would hope any new government recognises the importance of two-way market access, a transitional agreement and the ability of talented people across Europe to get access to the best jobs.
"We cannot risk harming London's position as the world’s leading financial centre or damaging the financial services industry, which supports 2.2m jobs in the UK and generates £72 billion in tax income.
“We will continue working with government and others to ensure this is understood.”
Investment Association: "Cool temperaments must prevail"
Investment Association chief executive Chris Cummings said: "Once again, the British public has confounded experts and pundits to deliver a verdict that few predicted.
"We stand ready to engage with government, whatever its final composition, to continue to create growth, jobs and investment.
"Cool temperaments must prevail over hot heads in the coming days and weeks, as the country charts a way forward in the biggest domestic and foreign policy challenges it has faced since the Second World War, in particular our new relationship with the EU."
WPP's Martin Sorrell: "Everything is a big question mark"
WPP chief executive Sir Martin Sorrell told City A.M.: “[We are] now in incredibly uncertain territory with very little, if any clarity about when, how and what Brexit negotiations will be. Everything is a big question mark.
“[It] looks like the DUP might agree to shore up the Conservative majority, but this would be very fragile. Maybe there will be another election shortly like 1974…. The electorate clearly doesn't like political expediency.”
Neil Woodford: "The outlook for the UK economy has actually improved"
Fund manager Neil Woodford said: “In all the heat and light that accompanies an unexpected political outcome, a lot of extreme conclusions have been discussed by market and media commentators. From where I’m sitting, however, economically not a lot has changed. In fact, in some respects, the outlook for the UK economy has actually improved...
“Membership of the EU Customs Union could be seen as a minimum requirement if a deal is to be struck with the DUP and, in turn therefore, the probability of a softer Brexit outcome has risen. At the same time, the risk of a second referendum on Scottish Independence appears to have substantially diminished.”
Institute of Directors: "The last thing business leaders need is a parliament in paralysis"
Stephen Martin, director general of the Institute of Directors, said: “Business leaders will be acutely aware that parliaments without majorities are more prone to politicking and point-scoring than most.
“If we do indeed see a minority government, both sides of the aisle must swallow their pride and work on a cross-party basis on the most important issues.
“The last thing business leaders need is a parliament in paralysis, and the consequences for British businesses and for the UK as an investment destination would be severe.”
CBI: "The UK needs to be fast out of the blocks"
CBI director general Carolyn Fairburn said: “With only 10 days before Brexit talks begin, the UK needs to be fast out of the blocks. Agreeing transition arrangements and guaranteeing EU citizens’ rights should be early priorities to get the talks off to a good start and show to the world that trade and people come first.
“Firms will support the UK develop our inclusive, innovative and open economy. More than ever, the new Government must work together with business to make the most of the opportunities ahead. Firms can provide the evidence, ideas and solutions from the shop, office and factory floor to secure our future prosperity.”
British Bankers' Association: Politicians must deliver certainty and economic stability
Anthony Browne, chief executive of the British Bankers’ Association (BBA), said: “Politicians across all parties must focus on delivering certainty and economic stability to ensure businesses can continue to deliver for their customers.
“The negotiations on the UK’s departure from the EU are due to start in just a few days’ time and the deal that must be reached as part of that process will have significant implications for banks, business and consumers across Europe.
“Securing a phased process of implementation will be paramount in delivering a Brexit deal that protects the interests of customers and clients in the UK and EU.”
British Chambers of Commerce: "The swift formation of a functioning government is essential"
Adam Marshall, director general of the British Chambers of Commerce, said: “Whilst companies have for many months done their best to screen out political noise in order to focus on their own operations, this result will prove much harder for UK businesses to ignore. The swift formation of a functioning government is essential to business confidence and our wider economic prospects.
"Businesses are adept at forming alliances and coalitions when important interests are at stake. We should expect the same of our politicians."
Federation of Small Businesses: We need reassurance
Mike Cherry, national chairman of the Federation of Small Businesses, said: “In the coming hours and days, business needs immediate reassurance from the government that emerges about how it will protect the economy from any political turmoil. The UK must be seen to remain open for business, with a government committed to supporting enterprise.”
London Chamber: "There is no time to waste"
London Chamber of Commerce and Industry Colin Stanbridge said: “A hung parliament is a hugely frustrating result for businesses, only creating more uncertainty on top of the recent impact of the referendum vote, increasing costs and currency fluctuation.
“There is no time to waste in establishing a good deal for London in the Brexit negotiations and protecting the country’s economy but protecting the capital’s economy.
“Pivotal to that is infrastructure investment in London as well as securing the rights of EU national in the UK as well as ensuring we have access to skills in the necessary numbers to protect our workforce.
“We must also look to equip the next generation with the skills it needs to succeed.”
London First: "We need adults round the table quickly"
Jasmine Whitbread, chief executive of London First, said: “Business is coping with extraordinary levels of uncertainty, but this cannot continue. We need adults round the table quickly to chart the way forward.
“One thing is clear, whoever forms the next government cannot afford to simply ignore London. Our capital must have access to the people we need to keep our economy going, and we must start investing in the homes and infrastructure proven to create growth for the whole country. Business is ready to step up, developing skills and helping to fund projects like Crossrail 2. But government will have to reciprocate."
Brexit 'cliff-edge' feared
Rob Aird, a partner at law firm Ashurst, said: “What this result does mean, in all likelihood, is that the UK has just taken a giant step closer to the much feared 'cliff-edge' where UK businesses lose all their access rights to the Single Market overnight in March 2019.”
Paul Hardy, DLA Piper’s Brexit director, said:
This will pose a significant challenge for any government to implement a Brexit strategy. Moving forward on Brexit negotiations is going to be very difficult. The date for starting the negotiations will be pushed back, further eating into the two-year period. This additional political uncertainty is bad for businesses, who may find it even more difficult to make big decisions on jobs and investment, given this result's implications for Brexit negotiations, as well as on coherent policy making at home.
Fidelity Multi Asset Income’s Eugene Philalithis said: “Three months into the Article 50 timeline, it is now unclear who will conduct negotiations on behalf of the UK or even what those negotiating will aim to achieve.
“While negotiations are unlikely to begin in earnest before the German elections, this is not the backdrop that anyone will have wanted.”
A lurch to the left
Berenberg’s senior UK economist Kallum Pickering said: “With more seats won for Labour under far-left leader Jeremy Corbyn than in 2015 and 2010, yesterday’s vote potentially represents a serious lurch to the left from an economic policy viewpoint. Don’t forget, the Conservatives also campaigned on a moderately interventionist platform too.
“This could put the legacy of Thatcher’s pro-growth reforms at risk. If such policies were followed they could compound the damage that Brexit does to UK trend growth (1.5 per cent in case of a hard Brexit, from 2.2 per cent pre-Brexit). This outcome could further add to the risk that service companies may choose to shift some operations from the UK to the EU27 or the US over time.”
How banking stocks will react
Goodbody banking analyst John Cronin said:
We’re not going to focus in on the politics of the UK election result but, suffice to say, we see increased economic uncertainty (in the very short-term at least) as likely to drive some selling of UK bank stocks (so marginal downward pressure today in our opinion, consistent with moves in the cable in the early hours) – despite the fact that futures markets are, at the time of writing, indicating that UK-listed stocks should rise at the open.
That said, the result surely reduces the probability of a hard Brexit, which could be a boon on a multi-day view. For now, we don’t see the result as driving any material real change in circumstances for the UK banking sector
Aberdeen Asset Management chief economist Lucy O’Carroll said: “The muted response from financial markets so far reflects their sense of déjà vu. After all, in the past 12 months they have also had to absorb the shocks of the EU referendum result and President Trump’s election.
“That said, we could see a fair amount of volatility in the coming days and weeks unless Westminster’s response to this surprise result is remarkably smooth, which is unlikely. History tells us that hung parliaments are not durable, let alone with Brexit looming large. A request to pause the Brexit negotiations may be one possibility, but it’s not clear how that would work as there’s no precedent. Either way, this result looks to strengthen Europe’s hand in the negotiations.”
Some positivity for the stock market
AJ Bell’s Russ Mould said: “Investors need to remember that in the long term it is not politics that determine company valuations. Ultimately, it is profit and cash flow that drive share prices in the long term so investors should not let short term political noise divert them from their investment strategy.”
Investors should let the dust settle
Jason Hollands, managing director of investment management group Tilney, said: “As we saw in the immediate aftermath of the EU referendum, it is usually best to let the dust settle on the initial market reactions to political events such as this rather than act hastily. So, for now, the best course of action is probably to sit tight and assume the brace position as some potentially volatile days are ahead for markets as well as UK politics.”
Business as usual come Monday?
Mark Dampier, head of investment research at Hargreaves Lansdown, said: “There will be no dramatic changes in domestic policy immediately as there would have been under Labour had they got in.
“Therefore I see no need to make any rash investment decisions, given the range of possible outcomes over the next few weeks. Investors should sit tight or even buy if the opportunity arises…
“Once a government is in place I expect the dust to settle fairly quickly. There will be a dawning realisation that everything has changed and nothing has changed. For the vast majority of UK companies it will be a case of ‘business as usual’ on Monday. Many companies have been around for decades and seen governments of both colours come and go.”