April 18, 2017

May’s move and the Kingdom’s future

May’s move and the Kingdom’s future

Bill Blain discusses the Prime Minister’s decision, what it means for the future political makeup of the country and, more importantly, the future of the United Kingdom.

There will be plenty of unhappy Labour politicians this afternoon. Even though many of them hold “safe seats”, I suspect many will be updating their CVs and looking for new jobs.

May’s intent is to clear the decks of dissent. SNP leader Nicola Sturgeon was the only person name checked in May’s announcement rant. That is a clear message to the Scottish Nationalists: The Conservatives intend to win this election nationally, and I should imagine we’ll see a massive effort to back up the resurgent Scottish Conservatives over the next six weeks. Scottish Conservatives will focus on the SNPs domestic track record running the country rather than pushing for independence – it’s not a good one.

But the decision is not without its risks:

  • May does risk losing her overall majority – its only 16 – especially if voters respond favourably to the Liberals who will try to turn it into a vote on Brexit.
  • However, this is a national election where it’s the country that matters – the Conservatives have lost by-elections due to Brexit protest last year, but I suspect we are beyond that in the coming national plebiscite. Won’t stop the Liberals telling people how wrong they were last year.
  • The SNP will try to make it a Brexit/Independence vote, but the Tories only hold one seat in Scotland so the SNP have little to gain and everything to lose. I’ll be looking at Scottish seats in detail.
  • Labour are the party in trouble. Although many of their seats are supposedly safe, electoral dissatisfaction with Corbyn and their pro-Brexit demograph means they’ll have to play a real election with muddled policies, a disorganised party under a hapless leader… which must have been irresistible to May.  Shame.
  • The election notice and vote in Westminster should pass tomorrow. If she can’t get the two-thirds majority to overturn the 2011 fixed-term parliament act, a simple no-confidence vote will suffice to trigger the election.

What does it mean for markets?

  • Sterling Spiked Higher. Gilts went down. The FTSE’s done little.
  • Generally, this should be dampening Scottish uncertainty, giving the Tories a clearer mandate on Brexit by default, and positive for the economy.
  • But let’s look at the electoral constituencies in detail to work out the likely trends. Might the Tories lose their majority to a resurgent Liberal crew (doubt it). Might Labour get wiped… (perhaps).

Fascinating… And don’t believe the polls…

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Bill Blain
Bill Blain

Bill Blain is Strategist and Head of Capital Markets at Mint Partners, a leading agency brokerage owned by, but independent of, BGC Partners. He has over 30-years experience of investment bank and fixed income markets in particular: including spells as head of FIG at Bear Stearns in the 1990s, DCM at HSBC during the 2000s, and the development of new agency brokerage solutions to the liquidity crisis this decade. He is a regular commentator on financial markets. He joined Mint in 2012 to help expand the firm’s ability to provide clients with non-bank liquidity across complex transactions.

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