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EM Insider: an outsider view on the snap UK election

EM Insider: an outsider view on the snap UK election

Easter eggs must have indeed been good at Number 10 this year. In a bold political move, the PM has changed her mind and announced a snap general election for June 8. The main reason for this decision was to obtain a stronger mandate from the British people to negotiate Brexit from a united and strong position.

After all, opposition parties, the SNL and even the Lords have persistently tried to boycott her, which obviously weaken her hand in the negotiation.

According to the opposition, the PM is being opportunistic and trying to increase her lead. The hard truth is that, as a wise political pundit said: ‘May would have to be the Mother Theresa of modern politics not to take advantage of the lead now’.

Clearly, it is a great gamble, albeit a wisely calculated one. The economy is a solid footing at the moment and the mood is good. With opposition parties shattered into pieces and Conservatives enjoying a nice lead in polls, it is highly likely the lead will increase, if not stay constant at least.

A Conservative win would provide the PM with a ballot-won mandate to manage the country as she sees fit and to negotiate Brexit terms with Europe from a position of strength. That would be good, as the government should be able to keep its negotiating cards instead of publicly having to discuss them beforehand.

Whatever the outcome, these elections could mark the end of Labour’s Corbyn’s fantasizing about his ability to govern and even lead a respectable political party.

Of course, there are risks to the PM’s strategy. If the electorate focuses solely on Brexit, Conservatives may actually decrease their lead (a real unknown). That would weaken the government, but not so far as to lose its majority.

After all, the opposition is too weak and offering no rational alternative to the current government. As long as May remains in power, she will at least have been voted in for the job, which I am sure she will somehow capitalize on as PM. In the end, elections are likely to only strengthen the government’s hands for a Brexit negotiation comme il faut.

In the European context, these surprise elections can bring more uncertainty and higher volatility to developed financial markets. A potentially stronger UK position translates into higher-risk negotiations for the EU.

What if its announcement has an effect on the results of French elections and…the latter on the actual UK vote on the June 8? Luckily for emerging markets, I reckon effects would be limited. Let the games begin. 

Comments written exclusively for Citywire on April 18.

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