9 June 2017

That's another fine mess you've got us into

What does the new Parliament look like? Well, if the Tories end up with 319 seats and the DUP vote with the Tories, then together the Tories/DUP alliance ends up with 329 seats.

by John Royden

Head of Research


Sinn Fein won seven seats but they don’t come to Parliament. So it looks to me like 329 vs 314 on votes. The Tories can form a Government but it might not be easy sailing given some of the DUP’s extreme views on various subjects such as, amongst others LGBT rights, and the convention that Westminster does not get involved in Northern Irish domestic politics.

I cannot see any situation where the DUP would ever vote with Jeremy Corbyn, an IRA sympathiser of old. So the end result is not too far from what we had before:  a weak Tory Government.

My pre-election thoughts had been to buy international companies on the dip in the event of a weak Tory win. We are not seeing a FTSE100 dip this morning but I am still inclined to tilt towards an international flavour above a domestic one. James Edgedale, JM Finn’s Chairman, said in a pre-election note to clients that whatever the result, the broad thrust in the UK will remain unchanged; but that we should be more focussed on the international macro picture to see what determines our fate.

So, from an investment perspective, I think one should stay as you are. We will be looking for signs of how this affects domestic consumer confidence and I may be inclined to shy away from this area if confidence gets dented. A weak pound would not help consumer confidence but then the pound is up off the lows.

I think this puts pressure on the property market. The uncertainty must deter international investors and perhaps it pushes UK residents into delaying property related decisions.

Uncertainty is heightened because the Salisbury Convention, which states that the House of Lords will not block winning party manifesto policy, does not hold. But against this tide of uncertainty it has to be said that the chance of a second Referendum in Scotland has substantially diminished.

What will happen to Mrs May? She is weak and there are plenty of leading Tories who would like the PM slot on their CV. But this morning she appears to be adamant that she won’t go. 

I am not sure that Parliament would have to vote on a hard Brexit outcome because it is the default outcome if the UK can’t negotiate an acceptable deal. In the event of a soft Brexit bill coming before parliament, about 40 hard leave Tory MPs would vote against it. So it would be up to Labour to decide whether to support a minority Tory caucus in favour of the bill. Relative to pre-election expectations, I think this increases the chances of a hard or clean Brexit.


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