Economists urge May to accelerate Brexit plans

Britain's Prime Minister and Conservative party leader Theresa May. Photo / AP

Theresa May must start Brexit talks as soon as possible and prove she is making progress with the EU if she wants to restore confidence among British businesses, economists warn.

Investment could tumble following the general election as companies hold back on major spending plans at a time of intense uncertainty, while poorly thought-through schemes to intervene in businesses risk a "chilling effect" on the economy.

Economists want the Prime Minister to show quick results to stop a slump that could damage the economy, and business leaders want her to reinforce a pro-enterprise message.

"The to-do list is long and the clock is ticking. By pursuing some early wins we can create the momentum towards a good deal for businesses," said Carolyn Fairbairn, director-general of the Confederation of British Industry, writing in The Sunday Telegraph.

She wants Mrs May to give priority to "ensuring the rights of EU citizens, progressing transitional arrangements and shifting the focus of formal talks to future trading relationships" in the next 100 days, as "Britain needs to be seen - and heard - as open, pro-market and pro-enterprise".

But Ms Fairbairn also had a warning for Mrs May on any far-reaching new steps in the industrial strategy: "Before there are new market interventions made, they [should be] given careful consideration, with evidence-based, thorough and full consultations before intervening. Because what you don't want is a chilling effect on investment at this very important time."

Economists want some sign of the "strong and stable" leadership Mrs May offered in the election campaign, and are looking for concrete signals of activity rather than political deadlock.

"If she can get the first Queen's speech passed, that would be a confidence booster - because if she can pass one [bill], maybe she can pass more and this can work," said Caroline Simmons from the UK Investment Office at UBS Wealth Management, who said she fears for the state of the economy.

"For the immediate term this [hung parliament] doesn't bode well. In the run-up to the election, housing transactions were lower and activity levels were not quite what they were before the election was announced, and I wonder if that will continue."

Mrs May argues that "no [Brexit] deal is better than a bad deal". Analysts hope this will be a tactic to extract cooperation from the EU, rather than a plan to leave with no trade deal in place.

"If you believe this [claim that no deal is better than a bad deal] is part of a negotiating tactic, then once they get into the conference chamber, the agreements are much more amicable. That is the sort of thing I think will help give businesses a little more confidence that we're not heading to the edge of the abyss," said economist Peter Dixon at Commerzbank.