Could UK’s Snap Election Signal Softer Brexit Stance? - Context
by Fixed Income AllianceBernstein
British Prime Minister Theresa May has called a snap election on June 8. With only a slim majority in parliament, she hopes to strengthen her position ahead of complex Brexit negotiations.
May’s announcement that the UK is heading to the polls three years ahead of schedule is a surprise in terms of timing. But an early election has looked tempting ever since she took over as prime minister last July.
Stronger Mandate for Negotiations?
An electoral victory would give May a stronger mandate in the negotiations for Brexit—the UK’s departure from the European Union (EU). And she also hopes to boost her Conservative government’s parliamentary position. Recent opinion polls suggest that Conservatives enjoy a huge lead over the opposition Labour Party. But the Conservatives have a majority of just 17 seats in parliament—May hopes to turn this into a much more commanding advantage on June 8.
Of course, the prime minister’s gamble could backfire, particularly because she is putting Brexit firmly at the heart of the campaign. If the election becomes a proxy referendum on Brexit, the Conservative’s poll lead could suffer.
Conservative Victory: Two Brexit Scenarios
Still, the election is unlikely to be a single-issue affair, and May should take comfort from the Labour Party’s disarray and lack of a coherent Brexit strategy. At this stage, we’re assuming that the Conservatives will increase their majority.
The big question is what May intends to do with a bigger majority. One interpretation is that a crushing electoral victory would give her a robust mandate to pursue a hard Brexit, i.e. one in which the UK is willing to walk away from the EU with a much-downgraded trading relationship.
Pound Points to Conciliatory Position