UK Election Results Will Load Brexit?
British elections have been carried out and from a market point of view, there are potential problems that will disrupt the Brexit process.
The Conservative Party, which is currently in power, is unable to win a majority vote for parliament and this is suspected to have the potential to destabilize the British economy and create uncertainty regarding Brexit negotiations for less than two years.
According to the provisional vote count, the Conservative Party is only able to reach 314 seats, even though it takes 326 seats to reach majority status. The current Conservative Party (before yesterday’s election) has 330 seats in parliament. Meanwhile the opposition party – the Labor Party – is expected to win 266 seats, followed by the Scottish National Party with 34 seats and the Liberal Democratic Party with 14 seats.
Analysts fear that the composition of parliament like this – commonly called the “hung parliament ” – will aggravate and slow down the Brexit negotiation process.
The Hung Parliament or “hanging parliament” is a term used when no party wins the majority in parliament. Another term used is balanced parliament.
The final results of the new vote count will be obtained on Friday UK time. Thus, it is not certain that a hung parliament will occur, considering that in 2015 there will also be a hung parliament, but in reality the Conservatives have succeeded in becoming a majority.
This election was held after Prime Minister Theresa May in April called for elections to be accelerated to consolidate forces in parliament that allowed him to pass a Brexit strategy and strengthen his position in negotiations with the European Union. At that time, his party was reaping strong support according to the survey. But it turned out that after several mistakes in the campaign, support for the Labor Party was significantly reduced in recent weeks.
The election results were followed by a weakening of the UK around 1.31 percent against the USD to a seven-week low in the range of 1.2707.Market sentiment turned negative due to fears of a hung parliament that could potentially threaten Britain’s position in Brexit negotiations.
The problem is that within 11 days the Brexit negotiations must begin.Because Theresa May has started the implementation of Article 50, the official British divorce process begins from the European Union which must have taken place at the end of March 2019. With so many negotiations to be carried out, Britain must not waste time. Even though there have been at least seven days wasted during the campaign period.The more time wasted, the greater the risk of failure of negotiations.
However, there is a strict dividing line between the pound exchange rate and Brexit negotiations. According to Kallum Pickering, a senior British economist at Berenberg said that a hung parliament could force a compromise between parties. If a compromise is reached, there is a possibility that the Brexit process will become softer and may grow positive sentiment for the long term.