As a General Election looms, voters face an uncomfortable choice between the potential economic damage of a disorderly Brexit or a left-wing government.
- The expectation is that Boris Johnson will remain Prime Minister after the election, but this is not certain
- The Conservatives have made the calculation that they can lose seats in London, the South and Scotland and compensate with industrial towns in the North and the Midlands
- The Institute for Fiscal Studies has suggested that a ‘Hard Brexit’ would be more damaging for the economy than a Corbyn government
The UK faces its third General Election in four years and its first in December for over 100 years. This is perhaps not the Christmas present that many were hoping for, but most Brits would nevertheless be delighted if it appears likely to resolve the Brexit impasse and end the uncertainty. Certainly, it would reignite interest in UK assets once again.
In a recent podcast for the BlackRock Investment Institute, former Chancellor George Osborne pointed out that while the expectation is that Boris Johnson will remain Prime Minister, it is by no means certain. Certainly, the campaign has not got off to an auspicious start, with Jacob Rees-Mogg apparently accusing Grenfell victims of lacking common sense, the Conservative PR team doctoring a video of Keir Starmer, and a James Cleverley no-show on Sky News.
It is worth noting that the Conservatives are enjoying a smaller lead than they had in the run up to the 2017 general election. Equally, this is a multi-party election in which there are other players. The Conservatives have made the calculation that they can lose seats in London, the South and Scotland, compensated with industrial towns in the North and the Midlands, but this is a gamble, particularly now the Brexit party has said it will stand.
Osborne was clear that if the Conservatives emerge with a majority, Brexit will happen with the Boris Johnson deal, but the threat of a second ‘no deal’ looms at the end of the transition period should the two parties fail to agree a trade deal in time. If Labour comes to power (in coalition with other parties), then a second Referendum is likely early in the New Year. On that, the potential outcome is still unclear.
Whichever party comes to power, fiscal restraint is out of the window. No-one seems to much care about budget deficits or spending rules. That is worrying given that the size of the UK’s structural deficit.
A key question for voters will be whether the economic damage done by a ‘hard’ Brexit, would be worse than the damage done by a Jeremy Corbyn leftist government. The Institute for Fiscal Studies has suggested that a ‘Hard Brexit’ would be worse. Either way, the UK population has an uncomfortable choice ahead.