Key points on the next general election - Capital Economics
UK Economics

Key points on the next general election

UK Economics Update
Written by Andrew Wishart

If Parliament moves to rule out a no deal Brexit this week, a general election seems on the cards either before or after a delay to Brexit. With the Conservatives ahead in the polls, a no-deal Brexit would probably remain a strong possibility after an election. But a Labour government is also possible. That would rule out a no deal Brexit, but also bring with it lots of anti-business policies.

  • Following the vote in Parliament to push on with legislation to rule out a no deal Brexit, a general election is on the cards either before or after a delay to Brexit. With the Conservatives ahead in the polls, a no deal Brexit may will remain a strong possibility after an election. But a Labour government is also possible. That would rule out a no deal Brexit, but also bring with it lots of anti-business policies.
  • MPs voted in favour (by 328 votes to 301) of the first step to forcing the Prime Minister, Boris Johnson, to delay Brexit from 31st October 2019 to 31st January 2020. The PM immediately proposed an election in response. If the Prime Minister is successful that would prevent the Bill delaying Brexit from making it into law and allow him to seek a stronger mandate to leave the EU as soon as possible.
  • However, two thirds of MPs need to agree that there should be a snap election. If they do in a vote on Wednesday, it looks like there would be an election before Brexit on 15th October. But it is unlikely to pass on the first attempt because some MPs want to guarantee a delay to Brexit before granting an election to prevent Boris Johnson forcing through a no deal. Even if that’s the case, once the legislation is law an election is still likely, although it might take place between 31st October and 31st January 2020 during a delay to Brexit. The key point is that an election seems likely either before the current Brexit date of 31st October or after Brexit has been delayed.
  • Despite the Prime Minister claiming he “doesn’t want one”, the polls suggest a general election would give him the majority he needs to pursue his Brexit strategy. The Conservatives have jumped from 21% to 32% in the polls since Johnson became Prime Minister. (See Chart 1.) And Electoral Calculus’ prediction of the election result based on those polls is even more favourable – predicting a Conservative majority of 62. (See Chart 2.) Much would depend on Brexit policies and pacts, as essentially it would be an election on Brexit. The Conservatives and Brexit Party may form a pact to hoover up the “Leave” vote. Pacts between “Remain” parties are also possible, although they seem unlikely to be widespread.
  • If the Conservatives did win with a decent majority, they would try to secure a Brexit deal, but failing that would be content to leave the EU with no deal. The latter seems more likely than the former in which case we think the economy would slip into recession at the turn of the year, albeit a mild one.
  • If the polls change or are wrong and the election results in a Labour government or a Labour-led coalition, no deal would be taken off the table in favour of a softer Brexit, or even no Brexit at all following a second referendum. There are some scenarios where the economy would receive a net boost from this result as political uncertainty is reduced and some pent-up investment released. But the anti-business policies (such as high taxes and nationalisation) that Labour could introduce, if not constrained by a coalition partner, would probably result in the economy being weaker over a number of years. (See our UK Economics Update, “What would a Labour government mean for the economy”, 3rd September.)
  • Overall, an election may come down to a choice between a no deal Brexit and a Corbyn government. While no deal is the worst outcome for the economy in the short term, a radical Labour government would reduce the economy’s long-term potential.

Chart 1: Voting Intention (%, m’thly ave. of all polls)

Chart 2: Seats in Parliament

Sources: electionpolling.co.uk, Capital Economics

Sources: Electoral Calculus, Capital Economics


Andrew Wishart, UK Economist, +44 20 7808 4062, andrew.wishart@capitaleconomics.com