A2 Global's Brexit Outlook: Conservatives’ general election victory signals some policy continuity, paves way for Brexit

A2 Global's Brexit Outlook: Conservatives’ general election victory signals some policy continuity, paves way for Brexit

Latest General Election developments

  • The Conservative Party emerged as the largest party in parliament, winning 365 seats. This gives the Conservatives a sizable majority in the 650-seat parliament.
  • The Labour Party won 203, down from the 262 seats it previously held. The Liberal Democrats won 11 seats, one down from 2017, however this was a notable loss as party leader Jo Swinson lost her seat and was forced to step down. The Scottish National Party (SNP) dominated north of the border, increasing its seats in Scotland from 35 to 48. The SNP now controls over 80 per cent of seats in Scotland. 
  • For Conservative Party leader Boris Johnson, the election result is a clear pay off after leading a relatively centrist campaign while maintaining his pro-Brexit credentials intact, which proved to be a key advantage over other parties.

Analysis

  • The significance of the Conservative Party’s large majority cannot be overstated. In actual terms, it means that a stable government will likely lead the country for the next five years until a new election is held. It also means that the party will have a stronger mandate to deliver Brexit by 31 January and push the agreement reached with the EU in October through parliament.
  • Johnson’s core message of ‘Get Brexit done’ resonated well with voters across the country, particularly in England’s north and Midlands regions. Indeed, the Conservatives were able to pierce through ‘red wall’ constituencies where voters traditionally gravitate towards the Labour Party.
  • The re-election of the Conservative Party will provide some measure of continuity in negotiations with the EU as the focus of these switches to trade early next year. It will also give Johnson’s government more flexibility in parliament when trade negotiations begin.
  • The SNP’s strong performance in Scotland bolsters calls for independence, which will intensify after the UK departs the EU. Johnson, however, has ruled out allowing a second Scottish independence referendum, likely prompting a political standoff between Edinburgh and Westminster.
  • The Labour Party’s poor showing in the election will intensify calls on Jeremy Corbyn to resign immediately. Even if the leader does, the consolidation of the party’s leftist flank during his leadership means that a successor will likely embrace much of Labour’s current views on the economy. This could lead to Labour’s prolonged marginalisation with voters, while further widening the policy gap between the two main political parties.
  • Anxiety over some of the Labour Party’s policies, including nationalising some sectors of the economy which have caused alarm among the business community, may have also been an important factor behind their election loss, as well as questions over Jeremy Corbyn’s leadership.
  • Ultimately, a weakened opposition in the lower house means that parliamentary efforts to influence and frustrate the Brexit process will be limited. The composition of the ruling party in parliament will mostly comprise of Johnson loyalists, while the influence of the Conservatives’ pro-EU wing has been significantly diminished. 

Outlook

  • More clarity over Brexit has been welcomed by businesses and investors, with the pound sterling (GBP) reaching USD1.33 on 13 December. Business confidence will likely increase further once parliament votes in favour of Johnson’s deal, but major transactions will likely be held off until then.
  • However, despite the large majority gained by the Conservatives, the election results also reaffirmed some of the country’s divisions that have resurfaced following the 2016 referendum. Managing London’s relationship with Scotland will also emerge as a key challenge for Johnson’s government, as well as growing nationalist sentiment in Northern Ireland.
  • A new Conservative government that now represents a more economically and socially diverse set of constituencies will likely strengthen its focus on increasing public spending and improving key infrastructure outside London.