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Why the Politics of Brexit Are Toxic for Investors

Queen Elizabeth II welcomes Theresa May, left, at the start of an audience in Buckingham Palace, London, on Wednesday when she invited the former Home Secretary to become Prime Minister and form a new government.
ENLARGE

Queen Elizabeth II welcomes Theresa May, left, at the start of an audience in Buckingham Palace, London, on Wednesday when she invited the former Home Secretary to become Prime Minister and form a new government.


Photo:

Dominic Lipinski/Press Pool/Associated Press

By

Stephen Wilmot

July 14, 2016 8:51 a.m. ET

Sell in light of May and go away? So far investors have greeted the appointment of Britain’s new Prime Minister with relief. But that may not last.

Little was known of Theresa May’s stance on business until a campaign speech in Birmingham, Britain’s second-largest city, on Monday. She used it to stress the failures of Britain’s open economic model, citing the takeover of Cadbury’s by Kraft in 2010 and the near-takeover of AstraZeneca by Pfizer in 2014 as victories for “transient shareholders” over workers, communities and the country. She vowed to implement a “proper industrial strategy” and give company-board places to employees and consumers.

Admittedly, much of this is political rhetoric. Ms. May supported the campaign to remain in the European Union. Now she has to make clear that she is also on the side of the majority that didn’t.

She cannot push this antibusiness line too far, for fear of scaring off multinational companies at a time when Britain’s reputation as a solid home for investment is under intense scrutiny. Philip Hammond, the business-friendly new Chancellor of the Exchequer, may make more encouraging noises over the coming months.

Yet if Ms. May and her new cabinet are to maintain support longer-term, they need to make sure some reality follows the rhetoric. That will probably involve a more interventionist approach than the British right has traditionally espoused.

The market’s celebration of greater certainty is understandable. But Ms May’s appointment doesn’t make the politics of Brexit any less toxic for investors.

Write to Stephen Wilmot at [email protected]

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Why the Politics of Brexit Are Toxic for Investors Reviewed by on . ENLARGE Queen Elizabeth II welcomes Theresa May, left, at the start of an audience in Buckingham Palace, London, on Wednesday when she invited the former Home S ENLARGE Queen Elizabeth II welcomes Theresa May, left, at the start of an audience in Buckingham Palace, London, on Wednesday when she invited the former Home S Rating:
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