As the City of London celebrates a Conservative victory, it must also face a referendum on the UK’s membership of the European Union. That poll must happen by the end of 2017 if David Cameron is to honour the Tories’ manifesto commitment. The prospect will now dominate debate in the business world until polling day.
Not every business leader wants the UK to stay in the EU, but it’s reasonably clear that most do. In the City and financial establishment, opinion is even more one-sided in favour of membership. Expect to see a full-throttle lobbying campaign, accompanied by dire warnings that investment in the UK is at risk and that the City’s status as a global financial centre is under threat. It will make business lobbying for a no vote in the Scottish referendum look like a tea party.
Indeed, some City economists had argued in recent weeks that the EU issue is so important that another Tory-led coalition government might have been the “best” outcome for the UK economy. “Given the potential adverse effect on the UK economy of Brexit risk, in our view a minority Conservative-led government (that is unable to pass an EU Referendum bill) might be less risky for the UK economy than a Conservative-led majority that can pass a referendum bill,” argued Citigroup.
Possibly. In practice, one suspects Cameron’s stunning general election victory strengthens his hand in keeping the UK in the EU – which one assumes will be the position he eventually adopts.