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Is it One Googly Too Many for the UK Labour Market?

16 Jun 09:00 by

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I have penned a number of blogs over the past couple of years admiring the UK labour market’s resilience to whatever head winds and machinations that the global geopolitical system has thrown at it.  

Donald Trump, living wages, Chinese slow-downs, general elections, Scottish referendums, Brexit votes, foreign wars, austerity, omnishambles budgets, EU recessions, flat-lining productivity, political leadership challenges - the list is as long as the straight bat with which the labour market has played each googly as it continues to generate jobs at a near unprecedented rate and drive ever higher levels of employment.  

But has it finally met its match?     The political and economic landscape looked challenging enough even before Thursday's remarkable election result.    What hope for a smooth ride to Brexit now we have a minority government led, at least notionally, by a lame duck Prime Minister, and propped up by the DUP with its anti-Irish Republic policies - no doubt alienating what could have been one of our few genuine negotiating allies.    Given how fast the Article 50 clock is now ticking, the chances of a “cliff edge” scenario - being ejected without a deal – come March 2019 look increasingly likely, and as surely we've all known all along, only an extraordinarily bad deal could really be worse than no deal. 

Could it be any worse?   Well unfortunately I fear it already is, while I would like to remain politically neutral, it is time to be candid and state that the momentum that Jeremy Corbyn is currently enjoying means that he could well secure power if the Tories fail to reach an agreement with the DUP and usher in the money tree economics that he espouses.  That’s before we even get to the burgeoning inflationary problem that will surely now only be driven higher by the further devaluation of Sterling.

Add it all up and it’s a hardly a surprise that the CBI is already reporting a significant drop in its members’ confidence only days after the election.  It doesn't take much of a leap of faith to imagine investment projects being shelved up and down the country this week, and the boardrooms of Tokyo, Berlin and New York receiving proposals with Nuneaton hastily changed to Nantes, and this quickly feeding through to reduced demand for labour in the UK.

While Teresa May’s cloak and dagger approach might arguably have had some negotiating merit before last Friday morning, it is a completely busted flush now.     The business community needs the certainty that only a decisive, credible and singular policy statement from Westminster can provide.    Perhaps it is to time to buy some time and accept the budgetary and sovereignty compromises of European Economic Area membership at least as an interim measure, while the detail of a longer term post Brexit relationship is thrashed out by this – or perhaps the next – government.  

Contact the author, John Hunter, Group MD, on jhunter@argyllscott.com