So, who saw that coming? As results crept in from constituencies around the UK, the shock exit polls were largely borne out in the result. The ruling Conservative Party won, and increased their proportion of the vote, but managed to lose around a dozen seats. Labour, the largest opposition party, managed to gain more than 30 seats, and are only a few points lower than their rivals in the percentage of national support.
Losses in the Scottish National Party (SNP) and the total collapse of the UK Independence Party (UKIP) did not swing as heavily towards the Conservatives as many people anticipated, with some UKIP voters seemingly returning to Labour. What few predicted was that the strong ideological platform of Labour - and particularly its divisive leader, Jeremy Corbyn - appears to have galvanised youth voters, who do not normally turn out for elections.
Despite the election not being fought on Brexit, voters largely picked the Conservatives in strong ‘Leave’ areas, and swung back towards Labour in strong ‘Remain’ areas. There is also evidence that the jump in turnout was driven by the aforementioned increase in young voters, who were highly in favour of Remain. Those lines do not seem to have changed drastically since the Brexit referendum, however, belying any indication of widespread ‘Brexit’ regret at this point in time.
The final result is a hung Parliament, where no party has the decisive 326 seat majority needed to form a government that can pass laws unabated. The Conservatives are in the process of brokering a ‘supply and confidence’ deal with the right-wing Democratic Unionist Party (DUP) in Northern Ireland, meaning they would support the Conservatives in votes without occupying government positions.
In the short term, it’s tempting to say that little will change. The Conservatives have in effect lost 12 seats and gained 10, if they can guarantee the support of the DUP. They will form another government which has the potential to pass laws unimpeded. But they will need to ensure the cooperation of every member of their own party and the DUP to achieve this.
Given that the vote appears to indicate a rejection in part of their manifesto, some Conservatives may be reticent about supporting the more controversial proposals. The DUP have also aroused concerns about their possible links to terrorism - ironic, given concerns about Corbyn and the IRA - and strong stances on religious issues, such as abortion rights.
What this vote represents primarily is a loss of confidence. The polarised nature of support when it comes to Brexit has shown that rifts in public opinion have not healed. The election was not fought on Brexit, but May cited it as a primary reason for strengthening her support, and increasing her bargaining chips. On this evidence, 40% of people do not agree with the sentiment ‘no deal is better than a bad deal’; this will require a drastic rethink.
What this means for Brexit negotiations is, at least initially, more uncertainty. Talks were due to start in earnest in ten days’ time, and Theresa May’s initial speech has shown a desire to stick to this. That would mean continuing with Brexit Secretary David Davis, and presumably making few concessions to Remain sentiments.
There is patently a need to present a united front in these talks, but it will be interesting to see how this approach goes down in the coming days, given that the Remain vote seems to have been reaffirmed. There will also surely be concessions to the DUP, who were pro-Brexit but will still demand guarantees about their border with the Republic of Ireland.
Uncertainty is never a good thing in business, and the markets have reflected that, with another substantial dip in the value of Pound Sterling, not a good thing for businesses who import a majority of their goods. But foreign companies who have business interests in the UK are reaping the benefits from the low pound. Further delays to talks mean a longer wait for clarity on the UK’s relationship with the EU, also not a good thing. For those businesses developing contingencies for a difficult Brexit, then, things have not markedly improved.
If there is a positive, it may be that the likelihood of leaving the customs union has diminished slightly. A ‘soft Brexit’ seems more viable than it did a few weeks ago, when it was firmly off the table. This could potentially negate the damage of tariffs and trade barriers, eliminating the need to barter individual trade deals under WTO tariffs.
The problem with this ‘Norway style’ deal would be that freedom of movement and acceptance of EU directives are indivisible. The UK would be out of the EU on a technicality, but these are the two issues most cited by voters as reasons to leave.
The markets will settle down, however, and the broader picture for UK businesses could be far worse. There exists a chance of a softer Brexit. The Tories are still in power, meaning a potential cut to corporation tax, and little chance of an increase. But the strength of the Labour vote may also mean concessions on cuts to benefits and public services. With signs that consumer spending has dropped in recent months, any move away from austerity and towards putting money in people’s pockets could be a positive one.
At this early stage, the only thing that’s really clear is how unclear things are. There are potential benefits and drawbacks to a more even balance of party politics. And if things do not pan out in the Conservative-DUP alliance, there is even the chance of another election a few months down the line. Nothing is certain, but for those individuals and businesses most concerned about the impact of Brexit, these are interesting times indeed.
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