For all of the dubious mathematical contortions claiming a Remain victory in the EU polls, the Conservative Party is still a party of Brexit, whose advocates still outnumber the aggregate Remain vote. And it seems unlikely that whoever succeeds Theresa May will find their EU counterparts willing to offer the UK any concessions not already on the table, but needing to deliver an if not hard, then at least a chewy Brexit to save their party. Maybe the Labour Party’s simultaneous polling implosion has once again pushed further away the previously rising possibility of a Corbyn government, which threatened so much trouble for investors, balancing out fresh Brexit risks. Take shares in National Grid, for example, which have recovered steadily since mid-May, when a leaked report revealed the details of Labour’s plan to nationalise it should it come to power.
Whatever the case, this may be the calm before the storm, because there will certainly be more market-wrenching twists and turns in the months ahead as it becomes crystal clear that, like it or loathe it, a no-deal Brexit has turned on a sixpence to become the likeliest Brexit outcome. The best that Remain supporters can surely hope for now is an early general election in which a Remain party triumphs, or a ‘confirmatory’ referendum between the two Brexit extremes – staying in or storming out.
With the added uncertainty that any of these options bring, the idea that UK shares are cheap will surely be put to the test. Investors buying into that widely circulated idea had already enjoyed a 14 per cent year to date gain by the end of April, but have been taking money off the table since. As Phil Oakley and I discussed on a recent podcast, that has little to do with Brexit and much to do with a dawning realisation that many of the UK’s largest companies are in very poor shape and slashing their dividends – especially the former national industries that Jeremy Corbyn seems so keen to get his hands on – while smaller companies struggle to break free of their UK markets.
Indeed, while the EU and its industries are often described as sclerotic, that seems to be a charge that can be equally levelled against UK industry. So, while delivering Brexit may be the first challenge the new Conservative Party leader will face, arguably the bigger and more important task will be to define what comes next – a credible plan to support business must surely be at the top of the winning manifesto.
