There’s a bogeyman hiding in people’s closets.
Weirdly, he only seems to keep bankers and businesspeople up at night. They call this bogeyman “Jeremy Corbyn”.
Goldman Sachs is one of the companies affected.
One of their bankers suffered a breakdown as he warned Britain would become “Cuba without the sunshine” if Jeremy Corbyn were elected Prime Minister.
I could be wrong, but maybe this banker just feels personally targeted by Labour’s proposed “fat cat tax” on big businesses and the super-wealthy.
Financial services company Nomura is another player that’s getting queasy. The Japanese conglomerate has even drawn up a guide to “hedging against the risk of a Corbyn government”.
I’m taking the mickey a little bit, but the comments do say something.
Theresa May’s coalition of chaos is making a Corbyn premiership more than a distinct possibility.
Business will loathe Corbyn’s renationalisation talk, but they’ll undoubtedly see opportunities too.
May under pressure
One political issue has completely overshadowed everything else for about two years now.
First Britain’s relationship with the EU grabbed the headlines. Ever since the referendum, it’s the country’s future ties with the bloc that have dominated the news cycle.
Britain’s focus on Brexit has been absolute. That’s why the government’s record on this issue weighs much heavier than anything else.
And boy, are they making a mess of it.
Negotiations with the EU have reached a stalemate. Brexit minister David Davis estimates the chances of a breakthrough in the talks in December to be fifty-fifty.
Meanwhile Britain’s used up almost a third of its negotiating time and the two parties have yet to start talking about future trade relations.
Only a series of scandals have briefly managed to take the limelight off Brexit but that’s hardly done Prime Minister Theresa May any good.
The scandals have cost May two government ministers this month. At least 40 MPs from her own party are openly plotting to replace her.
Not strange, then, that investors have started paying more attention to the Corbyn scenario, where a 68-year-old socialist firebrand settles into 10 Downing Street.
Some business leaders see the plot of Chris Mullin’s novel A Very British Coup play out right in front of their eyes. They’re running scared.
However, not everyone in the business world seems to take issue with Corbyn.
Especially Labour’s plans for a less intrusive Brexit are viewed more favourably by the markets. And even business concedes state intervention in certain areas makes sense.
Business would welcome a number of Labour policies with open arms, while the party’s nationalisation plans might be hard to enforce.
Prime Minister Corbyn
What can we expect to see if “Comrade Corbyn” were to be installed as Britain’s political leader?
Probably the first question weighing on investors’ minds is what a Labour victory would do to the pound.
“No matter what happens with Brexit – good or bad – a Labour victory is much worse for the currency,” says currency trader Tom Tragett.
“There will be a significant move lower if Labour wins and it may last for quite a while.”
Just to clarify, even if the Conservatives stay in power, Tom can see the pound drop to parity with the dollar in the next few years.
He reckons the pound’s weakening after the referendum was just the start of a big move lower, though a Labour win could set up the pound for another big drop.
So we could see a run on the pound. UK assets could be impacted as well.
Many expect a Labour government to spend more and worsen Britain’s fiscal standing. This would make UK government bonds less attractive.
A Corbyn victory would probably have a negative effect on the markets, but the fears of a Corbyn government may be overdone.
A Labour government wouldn’t turn Britain into Cuba, just like a corporate tax cut from Philip Hammond wouldn’t be enough to make Britain a less exotic Cayman Islands.
Though the business community won’t look forward to the prospect of higher taxes, there are plenty of Labour policies it could get on board with.
Labour’s pledges to invest in education, infrastructure and research and development should be welcomed.
Inequality is an issue that urgently needs to be addressed. Despite May’s promise to help the “just about managing” she’s making little progress.
How much Corbyn can do we’ve yet to see. But there’s no question the Labour leader would be more motivated to tackle this issue.
Labour’s policy for Brexit is another point where the progressives have the support from business. Although Corbyn’s views on this are still a question mark, his party clearly favours a softer approach than May’s government.
And it remains to be seen how many of the hardcore left ideas a Corbyn government could actually push through.
Not every Labour MP has a poster of Leon Trotsky in their office so Corbyn would likely face opposition from his own party on issues like renationalisation.
Some business leaders might even see the pros and cons of a Corbyn government largely balance out if the Labour leader is forced to sand down the sharpest edges of his policies.