The UK election results are still being counted, but we are getting close to a final tally and the picture is getting clearer. If the question is who won, we would say that Theresa May had a bit of a Pyrrhic victory. She called these snap elections (there was no need for a UK election yesterday) and had a huge majority in the polls only a month ago. However, May’s conservatives won far less seats then expected and there is now pressure on her to resign. For the moment, Theresa May is staying on and because she did not win the outright expected majority of Parliament seats she plans to coalition with Democratic Unionist Party (DNP) to get by the a slim majority. The DUP wants a Tory Government but will need some concessions on issues related to North Ireland in return. The situation is flux but for now the DNP/Tory coalition (of some sort) appears to be the likely scenario.
Full UK Election results summary
With 649 out of 650 seats declared:
Conservatives: 318 seats (-12). 13,650,900 votes. 42.4% share
Labour: 261 seats (+29). 12,858,652 votes. 40% share
SNP: 35 seats (-21). 977,569 votes. 3% share
Liberal Democrats: 12 seats (+4). 2,368,048 votes. 7.4% share
DUP: 10 seats (+2). 292,316 votes. 0.9% share
Sinn Fein: 7 seats (+3). 238,915 votes. 0.7% share
Plaid Cymru: 4 seats (+1). 164,466 votes. 0.5% share
Greens: 1 seat (=). 524,604 votes. 1.6% share
UKIP: 0 seats (-1). 593,852 votes. 1.8% share
SDLP: 0 seats (-1). 95,419 votes. 0.3% share
UUP: 0 seats (-1). 83,280 votes. 0.3% share
Alliance: 0 seats (-1). 83,280 votes. 0.3% share
Yorkshire Party: 0 seats (=). 64,553 votes. 0.2% share
National Health Action: 0 seats (=). 20,958 votes. 0.1% share
Christian Peoples Alliance: 0 seats (=). 16,119 votes. 0.1% share
BNP: 0 seats (=). 5,869 votes. 0% share
Monster Raving Loony Party: 0 seats (=). 4,642 votes. 0% share
Women’s Equality Party: 0 seats (=). 3,890 votes. 0% share
How are the markets talking the UK election results? The British pound plunged last night as much as 2 percent on the news of an uncertain coalition in the UK. However, markets are short-term focused and this could just be a bump as we get certainty.
UK Election – Here is what analysts are saying?
The UK is on course for a second hung parliament in a decade. Mrs May’s failure to win a majority is a surprise, although it comes after sizable declines in support for the Conservatives over the past month. Fresh elections cannot be ruled out – we know from experience that minority governments are difficult to run. It is questionable whether the Prime Minister can maintain her position, and a new leader would raise the risk of another election this year. These election results call the Brexit result into question – at the least, this could be seen as a rejection of Mrs May’s hard stance on the upcoming negotiations. Whatever the case, her party’s position in parliament will be a roadblock to getting her own way on what is set to be the most defining event in many years. Greater uncertainty could herald weaker investment, while the impact from a lower sterling could mean weaker consumption.
We think this result intensifies the downside risks to the near term economic outlook. Such significant political uncertainty will further dampen sentiment and confidence, exacerbating the weakness we have already been starting to see over recent months Short end rates are likely to decline, while at the longer end a renewed safe haven bid will be offset by concerns about a loss of demand from overseas investors alarmed b the political uncertainty that could persist for a prolonged period of time.
Macquarie agrees with our assessment and states “Never in British electoral history has a victory been more pyrrhic”. Why? Because May is barely hanging on to power just ahead of Brexit negotiations which are supposed to start in ten days from now.
Also Macquarie and other bank analysts note all this uncertainty comes as the UK economy is showing signs of slowing down – the combination of economic woes, Brexit in 10 days, and political uncertainty is not a great situation.
the seat projection given by the exit poll is accurate, this would point to the scenario which we described as “No Better Than Before”, in our election preview. This is a major surprise and would not be in line with our central scenario: we expected an enhanced majority for the Conservatives, based upon the 8pp average lead in the final polls coming into the election, and the Conservatives’ lead on major issues and on leadership. Still, if the exit poll is accurate, the Conservative party should (just) still be able to form the next government, for which an effective majority of more than 323 seats is needed. This assumes that it can rely on the support of Northern Ireland’s Unionist parties, and the Unionists retain their current 10 seats. Relatively small differences in the outcome compared to the exit poll could still make a Conservative majority or a Corbyn-led administration the more likely outcome.
Morgan Stanley had a good insight into the results in this note which was from a few hours ago. They predicted the NDP coalition. However, fortunately (for the Tories) it looks as if they will be able to form a (very) slim majority and Corbyn will not be Prime Minister as some had speculated last night.
A Tory minority government means a much weaker mandate to negotiate Brexit with the EU. This result raises questions about the ability of a minority government with a reduced mandate to negotiate a smooth deal with the EU in a timely manner. The fragility of the government could mean a dilution of the previous Tory vision of Brexit and could force a rethink of the Brexit strategy.
Right now it seems that Brexit will go ahead but May’s position is not strong and there is but a slim majority at the end of counting.
In a follow up note, Credit Suisse opines:
A Conservative/DUP coalition would give a working majority of 6 or 7, yet on average there are 4 by-elections a year. Assuming a scenario of 2 Conservative losses a year, then at most the government could last 3 years, but the unexpected can happen. Thus we believe another election within a year is a strong possibility. If current PM May were to contest a second election, we would assume a reasonable chance of a Labour minority or majority government. Although, a campaign led by a different Conservative leader and with lessons learned from this campaign’s failings could lead to a different result. The challenge to this is that those aged over 65 predominantly vote Conservative and many of May’s policies (on social care, pensions and the winter fuel allowance) penalised them. The dilemma is that 66% of under 25s voted for Labour and 75% of under 25s voted Remain in the EU referendum.
That is an interesting point by the analysts at CS. With other smaller elections if only a few members lose their seats there may need to be another election very soon! That is something neither the markets nor this writer will enjoy.
What do you think? Do you live in the UK? If so, did you vote in the UK Election for May, Corbyn or Lord Buckethead? Comment below.