Holly Cook: I am Holly Cook, and I'm here at the Morningstar Investment Conference where we've just heard from Paul Mason, Economics Editor of Channel 4 News, and he has been rounding up the political and economic climate for us.
So Paul, we're only a few days after the election and we've voted in majority Conservative government. Can you summarise for us in a nutshell, what exactly happened there?
Paul Mason: What I think happened is that the election started off about austerity, the NHS, economic policy, jobs, these are the issues that three parties were fighting each other on, although what we normally call, the centre ground. But as the impact of the Scottish referendum then basically impacted on to British electoral politics and people realised there was a good chance Scottish National Party would wipe out Labour, leaving Labour only the option of a kind of cover deal with the Scottish National Party to govern.
We think we saw a sort of, shy and unannounced, rise of English nationalism. And maybe for one-time only, we don't know what will happen in the future elections. Some Lib Dems and some UKIP people lend their votes to the Conservatives. Some Labour people didn't turn out and Labour lost, much worse than it thought it would do.
Cook: Of course, we always say that the economy is not the stock market. They do not go hand-in-hand in every direction. But of course the two are inter-related, and one thing that the stock market hates more than anything is uncertainty. What would you say are the main uncertainties now going forward?
Mason: Well, I think there is one strong certainty. We can now predict, maybe for five and possibly 10 years, what the investment climate in Britain will be, what its attitude to carbon will be, what its attitude to infrastructure spend will be, which regions it would like investments to go into. So those are the positive things.
The big uncertainty is Brexit. We've now got the government half – maybe a third of the cabinet want to leave [the European Union] already. We've got a press that was very adept at driving sentiment during the Scottish referendum and during the election, now will be driving in a way that many businesspeople will be wondering whether we want the outcome.
On top of that, we've got the Scottish issue. I covered the Scottish referendum, I've covered this election. I think big national sentiment among the young is overwhelmingly towards either total fiscal autonomy or separation. I think the British economy won't be – the British economy, if that happens, so the investors will be looking at that quite closely, I think.
Cook: So given that those are the uncertainties, but of course, we have now got a government that is known to be very business friendly. So do you think that that means that the outlook in terms of business sentiment is one of positivity?
Mason: There is inevitably going to be positivity on the business sentiment, but then the problem remains, Britain remains a very, kind of quite sick economy. It is – for all the job creation, productivity is really low. We have a huge trade deficit. We did not rebalance, obviously, investment, i.e. business investment came back on the back I would argue of quite a lot of government spending on infrastructure.
But, look, it's not the worst economy in the world. It is – the economic story is a story that economic management can cope with, but it's as these – they are not headwinds, they are crosswinds of political uncertainty of Brexit, of what happens to the EU in a French general election and then the whole issue of Scotland.
For investors, they've going to have to weigh off this benign macroeconomic issue against the highly uncertain macro political issue.
Cook: Paul, thanks very much summing that up for us.
Mason: My pleasure.
Cook: For Morningstar, I'm Holly Cook. Thanks for watching.
