Why Boris could be a mixed blessing for the City

Why Boris could be a mixed blessing for the City

Boris and the Conservative’s thumping electoral victory inevitably led to an uptick in confidence, but dealmakers should keep an eye on the course No 10 is plotting.

Business is celebrating the thwarting of Labour’s most anti-business leader since Michael Foot and the abatement of Brexit-related uncertainty.

But we may be left wanting if we expected our Prime Minister who’s rhetorically attached to free trade to also support its philosophical sister, the free market.

Coherence and transparent decision-making are unlikely to be hallmarks of the new government. The decision to save Flybe in the name of regional connectivity is understandable, but the workings behind the decision are hidden from sight. It would be reasonable to anticipate more of this from Boris’s government.

It’s unsurprising when you think about the Prime Minister’s team. Above the various advisers in No 10 with ‘business’ in their remit sit Eddie Lister and Dominic Cummings who will continue to bring their distinct approaches to bear. Eddie, strong on pragmatism and relationship building, and Dominic, a colourful man of conviction with a good nose for what Tory voters want.

A blend of the two styles and timely favouring of one over the other will be necessary for the Conservatives to retain their new voter base.

In the social sphere, this blend begins to manifest as increases in public expenditure for much loved institutions like the NHS, while simultaneously nurturing Conservative credentials by coming down hard on issues like law and order. It’s a more challenging proposition, however, when it comes to meeting voter expectations around business while also ensuring the UK continues to be an attractive place to invest. The Prime Minister must be both a traditional Tory – a liberal, pro-business free marketeer – and a protectionist shielding British communities from the negative by-products of international trade.

When it comes to the latter, the interventionist and protectionist imperatives of the new regime begin to reveal themselves again in the new legislative programme. The National Security and Investment Bill is the vehicle lined up to carry the biggest changes to takeover rules in two decades through the Parliament this year.

The Bill is anticipated to increase the powers of government to intervene in significantly more mergers and acquisitions. If passed, the government would be able to assess deals in all sectors and businesses of any size. The legislation would also provide the government with “powers to mitigate risks to national security – by adding conditions to a transaction or blocking as a last resort plus sanctions for non-compliance with the regime.”

In the new political climate, we should keep an eye on legislation like this. These expanded powers rest on conveniently ill-defined and frequently non-disclosable ‘national security’ grounds which could be used to facilitate thinly veiled populist interventions, as some have argued similar powers have been in comparable jurisdictions.

While our starting point is that the new Conservative administration will continue to pursue the same broadly permissive approach to mergers and acquisitions we’ve seen in recent years, there are steps businesses should take to avoid falling foul of the ‘pub test’. Dealmakers need to make sure they’re effectively communicating, both openly and to decision-makers, that their deals deliver public as well as private benefits.

Clare Wesley is a Senior Consultant in Portland’s Corporate Team.

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