UK prime minister Boris Johnson has launched fresh snap elections set for 12 December aiming to secure a parliamentary majority that would back a no-deal Brexit, prompting fierce debates in the City of London.
Currency traders were also among those to view a Tory mandate as positive news for the UK, sending the value of the pound to $1.287, making a rise of 6% over the last four weeks.
But A "Boris Bounce" is expected if Mr Johnson launches a series of tax cuts aimed at attracting multinational firms in addition to further spending on the NHS, education and police forces.
Several economic analysts have mulled the impact of the British Prime Minister retaining his seat at Downing Street, as well as how the elections will affect UK markets, for better or worse.
Economic Impact Forecast On Upcoming Elections
Analyst Kallum Pickering of Berenberg Bank said that investors would back Mr Johnson as No 10 to "put the UK on the path to an orderly Brexit on 31 January 2020" and mitigate risks UK Labour and opposition leader Jeremy Corby could pose as Prime Minister, damaging the UK "with left-wing economic policies".
— Joumanna Bercetche (@CNBCJou) October 29, 2018
The leader of the opposition has pledged in recent years to renationalise parts of the UK economy, including transport, healthcare and utility services, among others, drawing reaction from the City of London.
Trevor Greeham, analyst for Royal London Asset Management, said: “A hung parliament with the Liberal Democrats as kingmakers would temper some of [Labour and Tory] extremes and it would mean a confirmatory referendum in 2020, with remaining in the EU as an option.
— O.Smith ➡️🌺 (@objectsmith) October 26, 2019
It's Beginning To Look A Lot Like Brexit
Retail and other fast-moving consumer goods (FMCGs) sectors could be adversely impacted by elections during the 'golden quarter' period, or Quarter Four (Q4) earnings heavily dependant on Christmas sales, analysts said.
Currency trader for Saxo Markets, Oliver Konzeoue, said that retailers needed a clear outcome form the December elections, adding that "FTSE companies such as retailers and exporters could come under pressure".
He added: “These businesses need the withdrawal agreement to be put in place as any extension proves costly – impairing their profitability. Investment plans would have to be delayed yet again and export contracts put on hold while retailers could see their revenues hit during the crucial Christmas sales period.
— Saxo Markets UK (@saxomarkets) October 30, 2019
But enior European economist and strategist for Schroders, Azad Zangana, said that a smooth Brexit with a transition period would remove "a great deal of downside risk for the UK economy", adding that his firm expected business investment to rebound "with the reduction in uncertainty, while households could also increase spending".
He added: "The build-up of inventories will have to be worked through, which will be a drag on growth, but this would be complete by the end of 2020. Overall, we could see a gradual acceleration in GDP growth and confidence.
The statements from the City of London come after the British Prime Minister was expected to lead snap elections by 15-17 percentage points, according to two polls on Thursday. IpsosMORI revealed that Tories would lead elections at 41 percent, with Labour, Liberal Democrats, Brexit Party and Greens trailing at 24 percent, 20 percent, 7 percent and 3 percent, respectively.
— Britain Elects (@britainelects) October 31, 2019
A YouGov poll found that responders said the Conservatives would lead at 36 percentage points, with Labour, Liberal Democrats, Brexit Party and Greens trailing at 21 percent, 18 percent, 13 percent and 6 percent, respectively.
— Britain Elects (@britainelects) October 31, 2019
Prime Minister Johnson has been pushing for an early election poll after Commons rejected his proposal to trigger snap elections three times in recent months, but Jeremy Corbyn finally agreed in late October to launch a general election after stating that a no-deal scenario had been taken off the table.
A new Parliament is expected to ratify the current withdrawal agreement after the elections, Mr Johnson said. If approved, the UK could finalise its Brexit plans following the June 2016 referendum, where 52 percent to 48 percent voted in favour of leaving the European bloc.
