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Parliament fracas is bad news for UK stocks

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This Wednesday in the House of Commons was better than anything that a screenwriter could have put down on paper. It started with the MP for the Scottish National Party Ian Blackford being kicked out of the chamber because he refused to sit down and stop talking during Prime Minister’s Questions when instructed to by the Speaker of the Parliament.

Blackford felt he needed to express his protest over the lack of debate over what he called a power grab in the EU Withdrawal Bill. His compatriots from the same party then left the chamber too in support, temporarily throwing the Questions into disarray.

Oh, Jeremy Corbyn …

The day did not get much better. Later, when MPs had to vote on a Lords amendment to the EU withdrawal bill 90 Labour MPs deliberately went against Jeremy Corbyn’s instructions to abstain from the vote and instead voted on the bill. This was the largest number of Labour MPs to ever go against Jeremy Corbyn on bills, with 74 voting for keeping the EEA membership and 15 voting against.

While on some level this reads like a comedy for business this is closer to being a tragedy. Car makers, big manufactures and businesses in general need long term clarity and stability to be able to make crucial decisions. Wednesday demonstrates that not only is the UK not clear about which way it is going but also that both of the parties are so splintered that within themselves that they won’t be able to come up with any consistent policy for some time to come.

The fallout is not necessarily always immediate but it is there, plain to see.

Unilever shares drop in FTSE fallout, component makers get frozen out

Unilever shares fell 3.5% to 147.50 after a high level official said that the company is unlikely to stay in the FTSE 100 index. Why that should have come as a surprise in not quite clear given that the company said in March it would wind down its London headquarters and make Rotterdam the base of most of its operations because of Brexit.

The move has made it difficult for the company to fulfill the requirements for the inclusion in the FTSE 100 and Unilever shares will probably stop being part of the index before the end of the year.

Also, EU members decided to directly block UK companies bidding for lucrative manufacturing contrasts which will be awarded as part of building the EU satellite navigation system Galileo worth £8 billion.

In situations like these it would fall not only on businesses but also on politicians to rebuild the ties with the other side. Witness how much effort the UK has put in with China, connecting the London and Shanghai Stock exchanges and paving the way for a myriad of business links to be forged. When it comes to the EU things are moving in the opposite direction.

Based on how the Commons is behaving it is a question who, if anybody, will be left standing, let alone who will fight in business’s corner. The FTSE will not avoid the fallout.

 

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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