UK set for third election in four years in bid to break Brexit deadlock

Pedro Gonçalves
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UK set for third election in four years in bid to break Brexit deadlock

UK prime minister Boris Johnson has called for an early general election and the opposition Labour Party has agreed, meaning Britain is heading for a December general election to try to overcome the political deadlock over Brexit.

Jeremy Corbyn, Labour leader, declared on Tuesday that his conditions for an early election had now been met and that he was satisfied that a "no-deal" Brexit had been taken off the table.

Britain's inability to break its half-century bond with the EU has halted costly "no-deal" exit preparations and reportedly seen freshly minted 50-pence commemorative Brexit coins melted down.

Boris is taking a gamble to deliver Brexit as a pre-Christmas election gives Remain voters a final chance to stop Britain leaving the EU. If Johnson wins the election, he says he will deliver the Brexit deal he agreed in Brussels this month.

Johnson is mainly concerned about amendments that could be attached to his bill. One proposed option would extend voting rights to E.U. citizens - a group that strongly opposed Brexit.

Another would lower the voting age from 18 to 16. A No 10 source said the government would pull the General Election bill if it is amended to lower the voting age to 16 or to give votes to 3 million EU nationals living in the UK.  

General elections have been held twice in the last four years - in 2015 and 2017. The next was not scheduled to happen until 2022.

Britain last had a December election in 1923. 

The pound recovered Tuesday against the dollar and euro as Prime Minister Boris Johnson looked set to secure his wish for a general election before Christmas aimed at finally forcing through Brexit. 

Around 11h15 GMT, sterling clawed back losses to trade at $1.2862, virtually unchanged compared with its level late Monday in New York. The euro meanwhile reversed direction to stand 0.2-per cent lower at 86.14 pence.

Nigel Green, CEO and founder of deVere Group, warned the pound and UK financial assets will be volatile in the run-up to Britain's first December general election since 1923 - and will remain so in the event of another hung parliament.

"This is a critical stage in the slow-moving, damaging, torturous Brexit saga.

"Expect the pound and UK financial assets to be increasingly volatile in the run-up to the general election, given the wide-ranging set of outcomes.

"The most detrimental of these outcomes for sterling, UK financial assets and the wider British economy, include another hung parliament or a victory for Jeremy Corbyn's Labour party."

He continues: "Boris Johnson's intention to secure a majority within the House of Commons is by no means guaranteed.  

"The Brexit Party will use the fact that Mr Johnson did not deliver Brexit by October 31 - something on which he staked his whole premiership. 

"The Remain vote could also be split between Labour, the Lib Dems, the Greens and the SNP. 

"Political fragmentation on this scale has never happened before in the UK.

"Therefore, a hung parliament looks like an alarming possibility, meaning there could be no majority to quickly and smoothly resolve the Brexit chaos.

"Should grinding deadlock continue, the UK economy would still haemorrhage investment and confidence. The fallout of Brexit has cost the UK three and a half years of lost opportunity and many, many tens of billions of pounds. This would only intensify with another hung parliament."

He added: "Meanwhile Jeremy Corbyn's Labour party will campaign on the most radical, left-wing manifesto in more than a generation.

"Should he win this election, his anti free-market policies - such as the re-nationalisation of industries from utilities to railways to postal services, and the forcing of companies to give 10% of their shares to staff - plus his high-tax policies, including a possible wealth tax, will spook the financial markets, hit long-term sustainable growth of the British economy, put more pressure on UK financial assets, and lead to a significant sell-off of the pound.

Green concludes: "The general election is set to be the most contentious and uncertain in generations. Investors now need to protect and build their wealth and assets by ensuring they are properly diversified across asset classes, sectors, currencies and regions."

Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors said: "With more parties joining the government's position, a UK election before the end of the year looks highly likely. An election could be the much-needed unblocker for the clogged political drain that is Brexit. However, the result needs to be decisive in favour of the pro-leave Conservative Party or the anti-no-deal rainbow of opposition parties.

"A narrow Tory victory, requiring support from elsewhere to form a workable government, could simply leave us in the same clogged political situation. However, it is also unclear how a coalition of Labour, Liberal Democrats and the Scottish National Party would coalesce around a target Brexit outcome, let alone wider policy objectives.

"The latest polls indicate that PM Boris Johnson is benefiting from the progress made with the EU and his clear Leave message, despite missing his "dead in a ditch" Halloween deadline. Labour looks likely to be the main loser, its vote share eaten away by both sides of the Brexit spectrum.

"A lack of clear, desired outcome - beyond blocking no deal - continues to hamper the main opposition party. Having a clear, cohesive Leave message simplifies the Tory communication, allowing them to benefit from the division of anti-no-deal votes among multiple opposition parties in the UK's first-past-the-post electoral system.

 

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