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UK General Election: Night of upsets points to an enormously difficult period to come for the UK

A fairly staggering set of results in June 2017 showed that in the UK, the political climate is changing. Almost every poll done in the run up to the election suggested a landslide victory for the incumbent government and the result was that the Conservative Party dropped its majority and only a deal with the DUP would provide them with a minority government. The implications of this result are wide ranging. It looks increasingly likely that there will be a second general election within six months as confidence in Theresa May and the very weak state of the government in parliament suggest that there will have to be a second election.

The return of no single solid majority for either of the main parties means that the UK will have great difficulty making promises to the EU on deals for Brexit. Overall the hung parliament result means that the UK is hamstrung for the time being and all the while, time is ticking to secure an EU exit deal. The appetite for hard Brexit appears to have been crushed and there will have to be a shift over to a softer Brexit deal.

All polls leading up to the election were showing a vast lead for the Conservative Party and indeed that is largely the reason it went ahead when it did. This election coupled with the Brexit referendum of 2016 and general election of 2015 has showed pollsters are unable to predict securely the outcome of UK elections and that traditional voting patterns are not secure.
Since the exit polls were announced sterling fell around 2% and that is a key indicator of the sort of pain that the UK economy will suffer whilst this instability continues. Economic markets usually wait with baited breath for any major election and they are mainly looking for quick reliable decisions. Whenever there are any political uncertainties markets usually drop as investors bet against the economy suspecting potential decline and smelling blood.

The entire premise of this election in June 2017 was for the purpose of producing a stronger majority for the government in order to increase the capacity and unity of the UK parliament to bolster the mandate when the government goes to negotiate in Brussels over Brexit. On that basis, the election has been an absolute catastrophe for the incumbent Tory government and what comes next is uncertainty for what might be a prolonged period.

If there was a particular message from the electorate that could be gleaned from this election and the way the vote stacked up, it was that the idea of “no deal is better than a bad deal” which is a hard Brexit type approach that Prime Minister May has been pursuing, has been rejected. The policies that the government has been campaigning on have not been trusted enough for the UK to get behind them in such a way as to provide a majority.

The Labour Party has been remarkably divided on the issue of Jeremy Corbyn since his election, multiple challenges to his leadership, attacks from senior figures in the media and a lack of trust from the parliamentary Labour Party have been constant. This result however is an indication that his politics and his leadership are credible with the public, which they didn’t believe to be possible. As Corbyn redesigns his cabinet to include some more big hitting Labour Politicians that have come in from the cold, the party will be much more able to be effective in parliament and that spells disaster for the hopes of the now significantly weakened government.

This government looks extremely unlikely to last because of how weak it is. Labour is currently not strong enough in number of seats to replace the Conservative Party should it falter. There will have to be another general election within the next 12 months most likely with a new head of the Conservative Party unless something dramatic happens to sure up the government’s majority in the next few months.

To read more please visit www.marketline.com for our full Analyst Insight on the UK general election