Next UK general election: what you need to know
It is highly likely that the UK will hold an early general election before the end of 2019. We answer two big questions: will it be before Brexit, and how could it impact financial markets?
When could the next general election be?
There is growing expectation that the UK will hold an early general election before the end of 2019, but the main question is whether one will be held before or after Brexit. Virtually, all bookmakers believe an early vote will be held before the end of the year. William Hill’s odds suggest there is a 69% probability that an election will be held in 2019, Ladbrokes Coral predicts a 63% probability while Betfair believes there is a 59% chance.
Can a general election be held before Brexit on 31 October?
Technically, yes – but time is not on the side of those hoping to hold a general election before the UK makes the irreversible decision to leave the EU. Boris Johnson is the only man with the power to call an early general election (the next one isn’t formally scheduled until May 2022), but the Brexiteer has promised the UK will leave the EU on 31 October ‘do or die’ and has ruled out holding a vote until Brexit has been completed.
Therefore, the only way an election will be held before the end of October is if opposition members of parliament (MPs) manage to trigger one – and quickly. The best way to achieve this before Brexit is for the opposition to call a vote of no confidence in Johnson’s government and gain enough support to oust him and his cabinet. But there will only be a matter of days to call such a vote once MPs return to the House of Commons from their summer recess on 3 September.
- If a vote of no confidence is tabled on 4 September (the day after MPs return) and goes on to be successful, Johnson’s government would be ousted but remain as a caretaker government until a new government can be formed.
- There would be a two-week period after the vote, during which other parties would try to convince the House of Commons that they can command a majority among MPs and form a new government. That two-week period would end on 18 September. If a new government can be formed in that two-week period, then a general election will not be required, and it can take over Brexit as it sees fit.
- If MPs cannot rally around a new government within that timeframe then a general election will have to be held. There must be at least a notice of 25 working days before a general election can be held, which means the earliest date one could be held is 25 October – just six days before Brexit.
In theory, this means a vote of no confidence would have to be tabled by Monday 9 September if there is any chance of a general election being held before the current Brexit deadline – and even then, the vote would have to be held the day before 31 October, which seems highly impracticable but not impossible.
Those hoping to call a vote of no confidence to bring down the government and stop a no-deal Brexit know they only get one shot, so timing is crucial. A majority of MPs would have to support the vote of no confidence for it to pass, which means some Conservative members would have to vote against their own government for it to succeed. Some believe it is impossible to ask Conservatives to hand the keys to Downing Street to Labour leader Jeremy Corbyn, even if many of them are disgruntled and unhappy with how Brexit is being handled.
Will the next general election be held after Brexit?
The only other way that an early general election will be called is if the prime minister decides to call one. It may seem odd that Johnson would look to hold an early vote, particularly after his predecessor Theresa May completely misread the room when she called an election in 2017. But Johnson is aware that he has no mandate from the British people as he has not been elected. Indeed, when Gordon Brown took over as Labour’s prime minister from Tony Blair in 2007, Johnson said an unelected leader taking office was a ‘scandal’.
The most important thing to remember is that, under this scenario, Johnson controls the timetable. There would still need to be the minimum 25 working days for parties to campaign, but the prime minister would ultimately set the date the election would be held. With the Brexiteer pledging to take the UK out of the EU on 31 October with or without a deal, Johnson will do everything in his power to ensure Brexit is done before an election is held. Johnson would need the support of at least two-thirds of all MPs to hold an election before May 2022.
There have even been suggestions that Johnson could look to dissolve Parliament to prevent those against his no-deal plans from stopping Brexit, allowing the UK to practically sleepwalk out of the bloc.
There is a huge cloud of legal uncertainty hanging over the House of Commons at the moment. Some argue that trying to silence the House of Commons to force a no-deal Brexit is unlawful and undemocratic. Others say that if a general election is triggered then Johnson cannot make such life-changing and permanent decisions until the results are known. Johnson’s supporters argue that the UK can still leave the EU even if a general election is called because that is the default position – a point backed up by the UK’s attorney-general Geoffrey Cox.
Fragile politics: two-party system is broken
The two-party political system that has dominated British politics for decades is broken, and Brexit has been the primary cause. The divisiveness of the issue has seen both the Conservatives and Labour lose voters to other parties. The Liberal Democrats, spearheading the anti-Brexit campaign, has poached Remainer voters from across the political spectrum while the Brexit Party has stolen hard-line Brexiteers from both Labour and Conservative. The rise of these two parties, following the SNP winning Scotland from Labour, means the British public are breaking free from the two-party political system.
Plus, both main political parties have seen MPs jump ship over the past two years. A new political party was formed by a group of MPs named Change UK – now called the Independent Group for Change – and the number of MPs abandoning parties altogether to become independents has skyrocketed (many of which originally joined Change UK before quickly leaving to sit as an independent). Nick Boles left the Conservatives and Stephen Lloyd quit the Lib Dems over their respective Brexit policies, but the majority of current independents were formerly part of Labour and left either because of Brexit, the row over antisemitism or because they were accused of sexual harassment.
|End of 2015-17 parliament||2017 election results||Current makeup of parliament|
|Democratic Unionist Party (DUP)||8||10||10|
|Independent Group for Change||0||0||5|
Source: UK Parliament
*The Conservative Party has formed a minority government and has signed a ‘confidence and supply’ agreement with the DUP
The dramatic change in the makeup of Parliament has left it in a precarious position. The Conservatives' thin majority has been eroded: just one rebel MP from the Conservatives or the DUP could prevent Johnson from getting anything passed. But, unlike it has done traditionally in the past, those lost seats have not gone to Labour but to other parties, as Corbyn’s party has also lost seats since the last election in 2017.
General election polls: latest voting intentions
The divisions in the UK are set to become more evident if a general election is held. Nearly every pollster and bookmaker believe neither the Conservatives or Labour has what it takes to secure an outright majority in the next election. This means neither would be able to form a majority government and would have to form some form of partnership or coalition with other parties if they are to take office.
The latest polls suggest the Conservatives have regained some support since Johnson took over from May, with his hard-Brexit policy convincing some of those who had turned to the Brexit Party to return, but not enough to suggest Johnson could increase his government’s majority in an early election. They also suggest Labour has also regained the support of some Remainer voters after pledging to call a second referendum if it won a general election, under which it would campaign to remain in the EU, but it is still significantly behind the Conservatives.
Virtually, all the UK’s smaller political parties are expected to gain a substantial number of seats in the next election. Polls suggest the Lib Dems could secure around one-fifth of the vote compared to just 7% in the 2017 election, while the Brexit Party, formed after the last election, is set to steal around 15% of the vote in its first election.
Pollsters' results on next elections predictions
|Survey end date||Conservative||Labour||Lib Dems||Brexit Party||Greens||Change UK||UKIP||Other||Leader|
|ComRes||11 August||31%||27%||16%||16%||4%||0%||1%||5%||Conservative (+4%)|
|Survation||11 August||28%||24%||21%||15%||3%||0%||0%||9%||Conservative (+4%)|
|Opinium||9 August||31%||28%||13%||16%||5%||0%||1%||6%||Conservative (+3%)|
|YouGov||6 August||31%||22%||21%||14%||7%||0%||0%||5%||Conservative (+9%)|
|Ipsos Mori||30 July||34%||24%||20%||9%||6%||0%||1%||6%||Conservative (+10%)|
Source: Britain Elects
Political parties need friends, not enemies
The latest polls suggest the vote is now spread too thinly to give any single party a clear majority, and the latest odds from the bookmakers support that view. The Conservatives are expected to remain the largest individual party and there is only a minor chance that Labour could steal the reins – but the fast-changing political sphere could cause dramatic change in these numbers before an election is held. For example, if the election is held after the end of October but Brexit remains unresolved then it is likely that the ‘Boris bounce’ will unwind and the Conservatives will yet again lose support to the likes of the Brexit Party.
Bookmaker odds for next UK general election: probability (27 August)
|No overall majority||Conservative majority||Labour majority||Lib Dem majority||Brexit Party majority|
Parliament is a very uncompromising mood, but compromise is what is needed. It is unclear who the Conservatives could turn to if it needs help propping up a new government. The DUP’s door could remain open, depending on how Brexit pans out and possibly in return for more money for Northern Ireland (having squeezed out an extra £1 billion under the current confidence and supply agreement). Otherwise, it could struggle to find friends in the current climate. The Brexit Party could be an option, but Nigel Farage’s team want this considerably more than the Conservatives.
Labour has more options if it needs to form a new government, but it is reluctant to partner-up with other parties in the belief it can win an election on its own, regardless of what the pollsters suggest. The Lib Dems, the SNP, the Greens, Plaid Cymru and even the Independent Group for Change could offer potential support to a minority Labour government. The problem is that Corbyn either feels he does not need their help, or, if other parties are willing to work with Labour then they are lucky to do so. He wants to be an unchallenged leader without the input of other party leaders and has thrown cold water on calls from Lib Dem leader Jo Swinson to form a cross-party ‘unity government’ led by anybody but him.
The current state of play suggests smaller parties could gain seats at the top table after the general election, which will make their views more prominent and force the two main parties to compromise, or cause gridlock if any coalition or partnership fails to see eye to eye.
How could a general election impact financial markets?
If an election is held before the UK leaves the EU, then Brexit will remain the headline policy that all political parties campaign under. However, all parties have started to voice their opinion on other matters over recent weeks because they are aware that Brexit has consumed all of Parliament’s time. Johnson’s initial pledges to hire more police and boost funding for the National Health Service (NHS) is one of the reasons why some believe the prime minister is preparing for an election on the premise that attention will return to domestic policies because Brexit is done-and-dusted. If a general election is held after Brexit has happened, then domestic policies will take centre stage as parties will have to paint a picture of how they intend to manage the country in a post-Brexit world. Whichever government is steering the ship after Brexit will have a momentous challenge on their hands - from immigration to international trade to taxation, everything will be up for review.
The general view of financial markets is pretty simple: the Conservatives represent the status-quo and are traditionally the party that champions business, while Labour’s socialist-leaning view poses a huge threat to capitalists and businesses. However, as the current state of play suggests the two main parties will have to reach out to others if they are to secure a majority, it is likely that one or many smaller parties could have a bigger role to play in domestic policy. This means markets need to consider how a government propped up by a party such as the Lib Dems or the Brexit Party could influence domestic policy (the latter has no other policies outside of Brexit).
The general view is that the next government will generally raise spending, whoever takes charge. Johnson’s Conservative party has already signalled it is willing to spend more after years of austerity while Labour has promised to fling open the purse strings.
Read more about UK general elections highlighting why investment diversification is important
Key domestic battlegrounds in the next general election and a look at what stocks could be impacted by any major changes:
Supporting the NHS is regarded as an easy win for politicians and raising funding will be among the top priorities for most political parties. The NHS has been chronically underfunded for years. Some could argue the NHS receives adequate funding but is mismanaged and overspends. But the fact is, the NHS has made billions in savings and is still struggling to cope with growing demand. Just under half of all NHS trusts were in the red during the 2018/19 financial year.
There is the possibility that the debate around privatising the NHS will be reignited during the campaign. Although it is generally considered as a highly unpopular policy, chronic underfunding has led some to question whether there is more of role for private companies after Brexit.
There are a number of stocks that supply goods or services to the NHS. Spire Healthcare is one of the largest providers to the NHS. Convatec Group, which provides the likes of colostomy bags and catheters, and Smith & Nephew, which supplies goods like wound dressings, could also be impacted by any increases or decreases in NHS funding. It is also worth watching firms that let out properties to NHS organisations, such as Primary Health Properties and Assura.
Policing and prisons
Overall funding for the police rose over 30% between 2000/01 to 2010/11, but has fallen 19% since (taking inflation into account). Forces have had to become more financially independent by raising more of their own money to plug a 30% cut in direct funding from the government over the past eight years. The general mood among the public is that the cuts to policing have been too severe and its effects are starting to be seen on the streets, primarily demonstrated by the rising numbers of stabbings or the emergence of County Lines drug dealing.
Capita provides ‘mission critical’ software and products to UK police forces, including core communication lines used by officers. It also runs critical communication lines for the Ministry of Justice and has contracts running the likes of asylum seeker centres. G4S operates several prisons. Another stock to watch is Petards, which provides Automatic Number Plate Recognition (ANPR) technology to UK police forces.
Education is another area that is regarded as underfunded by all parties. The Conservatives have pledged to raise funding over the forthcoming years while Labour has a more radical proposal to create a National Education Service (NES) that would provide ‘cradle-to-grave learning that is free at the point of use’.
Pearson makes over one-fifth of its revenue from the UK, providing the likes of student assessments and qualifications. Wey Education is another stock that could benefit from increased funding as it operates a fee-paying online secondary school and provides education services to other public and private organisations. University student accommodation provider Unite Group could also be one to watch.
The severe shortfall in the amount of new housing being built has been acknowledged by all political parties, with estimates suggesting the UK needs to build anywhere between 170,000 to 300,000 new homes each year to keep up with demand. Last year, around 149,000 new homes were built, broadly flat from the year before. Markets should also expect a debate over the shortage in social housing, the quality of new build properties, and rules that have allowed former office and retail outlets to be converted into accommodation without planning permission. Any changes to the Help-to-Buy and other government-subsidised schemes, which have provided a huge boost to the earnings of housebuilders, would also cause disruption to the industry.
Most of the UK’s new homes are built by a handful of companies, including Persimmon, Barratt, Redrow, Taylor Wimpey and Berkeley Group. It is also worth looking at other stocks in the supply chain, such as building materials group Breedon, as their performance is linked to the amount of new construction work underway.
Energy, utilities and climate change
There are different views regarding how the UK should power itself going forward. Although the Conservatives have helped support the roll-out of solar and wind farms, it has also backed more controversial energy sources such as fracking and nuclear power. Labour is more ambitious when it comes to increasing the country’s reliance on renewable energy, with a pledge to generate 60% of UK power from renewables by 2030, and has said it would stop fracking if elected. Labour has also pledged to take National Grid and water utilities back into public ownership.
The two types of stocks to watch are renewables and frackers, particularly the smaller AIM-listed stocks. These include the likes of renewable energy supplier Good Energy, as well as the many small stocks with interests in UK fracking sites like UK Oil & Gas, Egdon Resources, Angus Energy and iGAS.
The debate over how the UK should manage immigration into the country still rages on as Brexit looms. Increasing immigration from EU states was one of the primary arguments for the Leave campaign with a promise that the country will have more control over its borders post-Brexit. The Conservatives are regarded as more cautious when it comes to future immigration policy and is touted to push for an ‘Australian-style’ points-based system once the UK leaves the EU, whereas Labour has promised to unwind Conservative immigration policy, close down detention centres such as Yarl’s Wood and install a ‘fairer’ immigration policy.
It is worth watching stocks and industries that rely heavily on immigrant workers, such as the agricultural, hospitality and retail sectors. There are also stocks that provide immigration services such as Serco, which operates secure detention services.
If new houses are built and areas like education and healthcare are to improve, then the UK will need to invest in more infrastructure: building more schools and hospitals, roads, and developing infrastructure for new technologies such as 5G. The fate of some existing infrastructure projects is also up in the air, such as High Speed 2 (HS2).
The troubles of big infrastructure firms like Carillion have opened-up a debate over the role of private companies building public infrastructure, so the role of stocks like Balfour Beatty, Kier Group and Mitie will be questioned during the next election campaign. BT Group, as the operator of OpenReach, could also come under fire if a Labour government takes charge.
The UK’s welfare system has dramatically changed since Universal Credit was introduced, which bundles separate payments for stuff like housing and child benefit into one payment and gives people more control over their benefits. However, its implementation has been far from smooth and drawn criticism. While the Conservatives traditionally focus on getting as many people into work as possible, Labour and other left-leaning parties have more generous systems in mind.
Changes in welfare can have a dramatic effect on the economy: it can dictate what a large proportion of the UK public have to spend, influence employment levels and affect other important economical metrics such as wage growth. One group that was hit hard by the introduction of Universal Credit was landlords, who were left with tenants that could no longer cover their rent under the new system.
The gambling industry is still counting the cost of the crackdown on Fixed-Odds Betting Terminals (FOBTs) after the Conservatives cut the maximum stake per play on gaming machines from £100 to just £2. While the Conservatives are unlikely to take further action should they stay in power it should not be ruled out, and any change in government is likely to lead to further restrictions being imposed, including a further cut to the maximum stake for FOBTs, which have become the main revenue-driver for many bookmakers. Labour has vowed to introduce tougher limits for online gambling.
UK general election offers trading opportunities
There is growing expectation that the UK will hold an election before the end of 2019 but there remain many unanswered questions. Will it be before or after Brexit? Will it be triggered by the prime minister or opposition MPs hoping to stop a no-deal Brexit? Will the Conservatives or Labour have to yield to smaller parties like the Brexit Party or the Lib Dems to secure a majority?
While the chaotic political picture is not aiding financial markets, it does provide plenty of opportunity for investors and traders – for example, sterling is likely to become more volatile if a general election is called.
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