Theresa May’s decision to call a snap election to strengthen her hand ahead of the Brexit negotiations has almost totally backfired. Instead of winning by a predicted landslide – an eventuality our readers appear to also have expected – the Tories are almost certain to lose their overall majority in the House of Commons with what is likely to become a hung parliament. Amidst uncertainty, the pound fell by 1.5% against the dollar and 1% against the euro.
In reality, the prospect of Corbyn as Prime Minister is slim. Despite their lost seats, the Tories are only around ten away from having an overall majority and could form a coalition with the friendly Democratic Unionist Party of Northern Ireland, which has won at least ten seats. However, Corbyn’s argument that should May continue as Prime Minister, her mandate will be one of “lost Conservative seat, lost votes, lost support and lost confidence.” He added that she should resign.
Indeed, May might well have to. The Conservative Party does not take kindly to a loser: Edward Heath was famously ousted by Margaret Thatcher as party leader following a series of election defeats. Nevertheless, Heath actually won one. May, on the other hand, is only in power already because Cameron stepped down. Meanwhile, the Liberal Democrats have emphatically stated that they will no form a coalition, which scuppers Labour’s hope of forming a majority coalition. If no party is able to form a majority government and there is a hung parliament, there will likely be a second election vote. The last time this happened was 1974: the Labour Party won both elections, albeit with a majority of just three the second time around.
The sterling has dropped 1.7% against the dollar and is currently sitting at around $1.27. It is too early to say what the impact of the election will be on the FTSE. Whereas the FTSE 100 usually rises as the pound falls, due to multinationals benefitting from the foreign exchange effect, many commentators are expecting an exodus from UK assets.
For Theresa May, this is well and truly a disaster. General election campaigns often do not impact the outcome, but this time, Jeremy Corbyn’s hard-fought campaign appears to have paid off enormously. This election is likely to be the final nail in May’s political coffin.