UK: Polls suggest a Conservative victory – ABN AMRO

Bill Diviney, senior economist at ABN AMRO, suggests that in the UK, the Conservatives currently enjoy a 10-15 point lead in opinion polls over their nearest rival, the Labour Party, but this proved disastrous for the Conservatives in 2017, with the party losing its majority in parliament.

Key Quotes

“The coming election’s predictability is further complicated by the UK’s first-past-the-post electoral system – a ‘winner takes all’ system where parties can win seats with a minority of the vote share in a given constituency, so long as they have the most votes. This did not pose problems when elections in the UK were two-horse races between right/left, Conservatives/Labour. However, the Lib Dems (pro-remain) and Brexit Party (pro-no deal Brexit) have both attracted voters from the main parties, and so extrapolating national polling to the constituency level could yield misleading predictions of the actual outcome.”

“With that said, of the likely scenarios – a Conservative majority, another hung parliament (similar to now), or a ‘Remain alliance’ (Labour and LibDem) victory – all lead to relatively benign outcomes for financial markets.”

“The Conservatives will campaign on the basis of their deal (whereas the risk before was that they would campaign for a no-deal Brexit), and another hung parliament or Remain alliance victory would likely lead to another referendum pitting PM Johnson’s deal (or some soft Brexit variant) against Remain. In any case, the risk of a no-deal disorderly Brexit is substantially lower than it was previously.”