With British Prime Minister Theresa May’s announcement of a snap election, 2017 has continued last year’s trend of political surprises. May had repeatedly said that such an election wasn’t in the UK’s “best interests”, and many expected her to ride out the remaining three years left after their decisive victory in 2015.
As with Brexit, the questions at this stage are numerous, and much will be decided in the run up to June 8th. But as all polls point towards a landslide victory, will the polls prove to be wrong again? Will May face more resistance than she expects over the fallout of Brexit? And if her party does win decisively, what are the ramifications for Brexit and UK business going forward?
Conservative loss
Even after all of the shock results and repeated dismay for the pollsters, a Conservative election loss (or even a slimmer majority) would be the biggest upset of them all. The Conservative Party holds a 21% average lead over its chief rival, the Labour Party, with as much as a 50% gap in perceived personal and economic competence between the two sets of leaders.
It is true however that opinion has shifted slightly towards Brexit, with concerns about some negative indicators such as the imminent loss of EU clearing houses, banking services and the falling value of the Pound. The well-documented problems with public services may also drive a backlash that does not directly relate to Brexit, although it’s hard to know whether this would manifest itself in seats and not just a scattered number of votes.
While many within the country would see a vote against the Conservatives as a fair recourse, giving more representation to the 48% of Remain voters, it would throw the Brexit negotiations back into uncertainty. While Labour were tentatively in favour of Remain, they have supported the outcome of the vote since then, and their voter base is equally split on the issue.
More likely than an outright Labour victory is a tentative coalition between Labour, the Liberal Democrats and possibly the Green Party. This may also operate in conjunction with Plaid Cymru and the Scottish National Party, although none of the aforementioned parties are on great terms with Labour. The central issue is that the Lib Dems and Greens are staunchly pro-European, whereas Labour has attempted to change its stance to align with lapse, pro-Leave voters.
This could mean an internal struggle to outline a new Brexit strategy, with compromises being made to each party on various issues. While this might be a positive in terms of representing the opinions of the British public, it could weaken the UK’s position in negotiations. That is unless the EU looks more favourably on a reluctantly leaving UK, and softens the terms in accordance.
However, it’s still fairly unlikely that anything major would change in negotiations. The key sticking point has always been the restriction of free movement as a means to lower immigration figures, and this is something the majority of the British public seem to back. Immigration and sovereignty were the key issues in the Brexit campaign, and Labour will not want to U-turn on its previous U-turn to supporting them.
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While this scenario would offer a more democratic outlook for British citizens, the potential benefits of a softer Brexit would be unlikely to offset the unavoidable issues of leaving the Union. Uncertainty also tends to negatively impact the Pound Sterling. While this helps blue chip companies based in London (but earning money in foreign currencies) and exporters, it’s unhelpful for both domestic focused and importing businesses.
Conservative victory
Far and away the likeliest of all the scenarios is a sweeping victory for the Conservative Party. The reasons for the Labour Party’s weaknesses are widely debated, ranging from its ‘un-Prime Ministerial’ leader to media bias, but the party is widely considered to be at an historic low point.
The Conservative party meanwhile has delivered on the Brexit vote and presented a strong face to negotiations, while achieving a steady if unspectacular economic recovery over the last seven years. There are many other issues to contest, but thanks to governmental experience, Theresa May is perceived as more competent and trustworthy on key issues such as the economy than her rivals. This is likely to make the difference in a period of incomparable uncertainty.
Whether or not people are voting for it specifically, this is likely to be held up as a renewed mandate for a hard Brexit. This would provide a measure of certainty (in intentions, if not negotiations) that would be much appreciated by businesses. Trade agreements would be pursued with countries around the world based on WTO tariffs, and corporation tax would likely be lowered, in order to compete with nations such as Ireland and Luxembourg.
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Instead of having an election looming at the end of the two-year process, May would effectively now have a full five years to negotiate the deal, as well as transferring or annulling EU laws to UK statutes. Whichever government is next elected would inherit a UK completely free of EU influence, for better or worse.
However, that certainty may be most useful for the formulation of concrete plans outside the UK. Knowing that the UK will definitely lose free movement and access to the Single Market could simply solidify existing designs on moving to the continent.
An alternate win scenario
Some prominent voices have suggested that, far from encouraging a hard Brexit, a strong Conservative majority might make the process smoother. It is worth remembering that Theresa May was pro-Remain prior to the vote, although to what extent this was following government policy is unclear.
At present there is a small group of Conservative MPs who are considered hardline Brexit supporters, and who currently have a significant voice in Parliament. It’s possible that increasing the number of Tory MPs would dilute their power. Again however, it’s hard to say whether the newly elected MPs would be more or less in favour of a hard Brexit themselves.
A statement by Deutsche Bank, who have vested interests in London, makes similar claims. They cite the possibility of electing ‘soft Brexit’ MPs and the certainty provided by an early election as stabilising factors for Brexit negotiations. A lack of public dissent and not having a looming election in 2019 would allow for a longer Brexit timetable, with more certain and intractable goals.
Aside from the extremely unlikely scenario of going back on Brexit, this could be the ideal case for business interests. This would not only provide the stability that comes from a clarity of purpose, but potentially lead to a softer Brexit with more trade benefits being retained. The longer waiting period would also allow businesses to operate unchanged in the meantime, and give them more time to plan for the future.
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