Bill Diviney, senior economist at ABN AMRO, points out that the UK will go to the polls on 12 December in what could yet prove to be a highly unpredictable election.
Key Quotes
“The Conservative Party currently enjoys a 10-15 point lead in opinion polls over the nearest rival, the Labour Party. However, the party enjoyed a similar lead over Labour in the period leading up to the 2017 election, and this proved disastrous for the Conservatives, with the party losing its majority in parliament.”
“The coming election’s predictability is further complicated by the UK’s first-past-the-post electoral system – a ‘winner takes all’ system where parties can win seats with a minority of the vote share in a given constituency, so long as they have the most votes. This did not pose problems when elections in the UK were two-horse races between right/left, Conservatives/Labour. However, the Liberal Democrats (pro-remain) and Brexit Party (pro-no deal Brexit) have both attracted voters from the main parties, and so extrapolating national polling to the constituency level could yield misleading predictions of the actual outcome.”
“With that said, of the likely scenarios – a Conservative majority, or another hung parliament (similar to now) – all lead to relatively benign outcomes for financial markets. The Conservatives are campaigning on the basis of their deal (whereas the risk before was that they would campaign for a no-deal Brexit), and another hung parliament would likely lead to another referendum pitting PM Johnson’s deal (or some soft Brexit variant) against Remain. In any case, the risk of a no-deal, disorderly Brexit is substantially lower than it was previously.”
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