How British Financial Markets Are Reacting After Boris Johnson's Win
Boris Johnson’s Conservative Party has won a large majority in the 2019 general election. Labour Party leader Jeremy Corbyn has confirmed that he will not lead his party in any future elections but will stay on during a period of reflection about what happened in this campaign. Meanwhile, Liberal Democrat leader Jo Swinson has lost her seat. Experts react to the news. Read about its implications for Brexit, Northern Ireland, Scotland, and the UK economy and markets.
Paul James Cardwell, Professor of Law, University of Strathclyde
A Conservative majority is what Boris Johnson wanted in order to ensure that his Brexit deal passed the Commons. There is now little in principle to stop his deal passing.
Various EU leaders will also be relieved that a majority in the Commons will clear a path forward. The exit day of January 31, 2020 seems more certain that any of the previous “Brexit days” due to the lack of domestic political hurdles. However, as has been noted repeatedly during the campaign, this would not mark the end of Brexit as a process. The transition period is due only to last for 2020 and what follows from that is still unknown—the future relationship between the UK and the EU is highly uncertain.
The idea that the UK and the EU could negotiate an agreement on future relations is not beyond the realms of possibility in the short time-frame available–after all, Theresa May’s government managed to get the Withdrawal Agreement in place with the EU. But it is often presented in the UK as a matter of “free trade.” This sounds straightforward, but it is not.
Even in economic areas, the potential wrangling over goods, services, capital as well as other areas where the UK and EU might want to cooperate is fraught with difficultly. The state of Swiss-EU relations where negotiation and renegotiation is the norm shows that “get Brexit done” is a hollow sentiment. But having argued for it and got his wish, the prime minister will now have to own it.
Sean Kippin, Lecturer in Politics, University of Stirling
This election result shows the continuing political divergence between Scotland on the one hand, and England and Wales on the other. While the contest south of the border saw voters embracing culturally conservative politics and Brexit, the Scottish National Party’s moderate pro-independence progressivism seems to have been very successful in Scotland.
The roots of this result lie in two referendums: the 2014 independence referendum, which established the SNP as Scotland’s dominant force; and the 2016 EU referendum, which created a justified grievance that Scotland was being wrenched out of the EU against its will.
Where the Conservatives won 13 Scottish seats under Ruth Davidson as leader in 2017, the party seems to have been fulsomely rejected this time around. Boris Johnson concentrating the Tory campaign on Brexit and his seductive message to ‘get it done’ appears to have been decisive in England and Wales, but it may have been a turn off for many Scottish voters.
Discussion now will turn to Scotland’s constitutional future, and whether a newly emboldened Conservative government will feel sufficiently able to dig its heels in and resist Nicola Sturgeon’s calls for a second independence referendum. Scottish politics has been interesting since at least 2014, and it promises to remain so.
Katy Hayward, Reader in Sociology, Queen’s University Belfast
This has been a momentous election for Northern Ireland. For the first time in its existence, those MPs who designate as unionist are in a minority. And, in stark contrast to Britain, it has more Remain-supporting MPs than Leave-supporting ones—although Sinn Féin MPs traditionally don’t take their seats in parliament. The result is in part a reflection of electoral pacts rather than a reliance on tactical voting. It is also because more unionists and nationalists have voted for the middle ground, as seen in the surge of support for the moderate pro-Remain Alliance Party and Social Democratic and Labour Party.
The Democratic Unionist Party (DUP) and Sinn Féin—both triumphant in 2017—each received blows. Most dramatically, the DUP’s deputy leader Nigel Dodds lost to Sinn Féin in a constituency that has never had a nationalist MP before. The political consequences of these results will actually be felt closer to home than in the House of Commons. The talks to restore the devolved assembly and executive at Stormont are due to start on Monday. These results, particularly in light of the new landscape in Westminster, will concentrate all parties’ minds toward success.
What happens next?
Helen Parr, Professor of History, School of Social, Global and Political Studies, Keele University
This Conservative majority will change the politics of Brexit. Boris Johnson will probably want to bring his withdrawal agreement to the House as soon as he can, perhaps in the first week parliament sits. It could be passed in principle before Christmas, with the technicalities to be debated in January, enabling Britain to leave the EU on January 31. There does not seem much doubt that the Conservative majority means Britain will exit its current relationship with the EU on that date.
After that, we do not know what will happen. We do not know what Boris Johnson’s plan will be, and we do not know how the opposition parties will react to the process of Brexit. Many people are speculating that a large majority will enable Johnson to soften Brexit, which would make a deal with the EU easier to get. Or possibly, it will mean he can extend the transition period—which would be permissible on the current terms for up to two years. But the fact remains that we do not know how Johnson will want to play it. Another possibility is that he might want to pursue a harder Brexit regardless. A large majority will probably mean he can secure agreement in parliament to whichever course of action he prefers.
Britain’s place in the world
Victoria Honeyman, Lecturer in British Politics, University of Leeds
For a post-Brexit Britain, there will undoubtedly be some economic opportunities, but there is a cost. As Boris Johnson removes Britain from the EU, Britain is globally weakened in its economic and political might. To secure those all-important trade deals, Britain will have to decide what pay-offs it is willing to make. For all his bluster, Johnson may have to swallow some uncomfortable truths and some uncomfortable compromises. Whether he can sell those at home is another matter.
While no world leader would object to the British people selecting the government that they want, it’s unlikely that many will be thrilled to see him return to Downing Street. That being said, few would have welcomed Jeremy Corbyn with open arms either. The risk to Britain’s global position and reputation is not primarily the prime minister. The biggest risk is Britain’s global weakness and its desire to stand alone in the world.
Costas Milas, Professor of Finance, University of Liverpool
Financial markets have responded positively to the general election result. Sterling, the typical barometer of international confidence in the UK economy, jumped.
This is because Brexit-related economic policy uncertainty is receding. Investors are interpreting the significant Conservative Party majority as a clear indication that Boris Johnson will soon sail his Brexit deal through parliament—he’s pledged to do so by January 31. This will then allow him to speed up negotiations with the EU in order to agree a new trade deal by the end of 2020.
According to Johnson’s pre-election economic pledges, government spending will increase by exploiting historically low interest rates to borrow more from international markets. Lower Brexit-related uncertainty and an expansive fiscal stimulus will provide powerful support to the Bank of England’s loose monetary policy in stimulating the UK economy.
The improved economic climate should encourage the UK business sector to reverse the business investment slump of the last two years or so. But don’t expect a business investment boom any time soon. At least not until Johnson and the EU agree on a new deal. Whether this happens by the end of 2020 or much later is another story.
What it means for the UK economy
Kevin Albertson, Professor of Economics, Manchester Metropolitan University
Boris Johnson’s clear majority gives him the freedom to act, if he chooses, to address the economic problems faced by the UK and by the world today. But it is not clear he fully understands what these problems are.
The world economy is slowing down, economic concentration means the fruits of economic growth are shared by fewer and fewer people, and what passes for economic growth is buoyed up by debt and ecological deficit more than by sustainable economic activity. These problems are not new, of course—they have been bubbling under the surface for the last four decades.
They leave Johnson, like all world leaders, in a conundrum. There are only enough good jobs in the world for about one third of the adult population, but it is by no means clear, and perhaps not possible, to boost economic activity sufficiently to create all the extra employment needed under the current economic system.
It hardly needs to be said that leaving the EU is unlikely to address these issues.
The general thrust of the Conservative Party’s agenda looks likely to continue down the route of global free trade and market-oriented policy. This has, since the 1970s, hampered the UK’s efforts to adapt to a world economy which has reached economic and ecological constraints.
It’s also likely that Johnson will be unlucky enough to be in office when the world economy moves into an economic slump over the next few years. This will not be his fault, but the economic tools in which he appears likely to place his and the nation’s trust are not adequate to cope with such a situation.
Hanna Szymborska, Lecturer in Economics, The Open University
The large Conservative gains are surprising because much of the dissatisfaction with the economy, which led to Brexit, was fueled by the Conservatives’ austerity agenda. They oversaw rising inequality, deteriorating public services, sluggish real wage growth, and faltering investment levels over the past nine years—particularly in the areas that have turned blue.
Because the Conservative Party manifesto did not offer any radical policies to boost the UK economy, it is hard to see how Boris Johnson’s government will help turn things around. In the short term, the near-certain prospect of a 2020 Brexit may bring a period of long-awaited certainty, reinforcing the market’s optimism by strengthening the position of the pound against other major currencies and restoring some confidence in consumer spending. But these initial feelings of stability may be short lived.
The transition period is bound to bring a fresh wave of uncertainty in the years to come as the UK begins to separate its legislative system from the EU. This is likely to discourage demand and drive investment away from the UK, which would put a further strain on the economy that already suffers from low productivity.
In the long run (depending on what kind of Brexit is concluded) the prospect of low demand, possible trade restrictions and the potential loss of cheap migrant labor from the EU is likely to have a negative impact on firms and on consumers if prices rise. In this context, the Conservative manifesto promises for boosting public spending may be difficult to do and too modest to make up for the increase in the cost of living, which is likely to ensue in this situation.
‘Let the healing begin’
Ken Rotenberg, Professor in Psychology, Keele University
After the win by the Tories in the 2019 election, Johnson stated in his opening speech, “let the healing begin”. Although the desire for healing is highly commendable and needed, social psychological research suggests that the path to achieving such healing will be a difficult one for the UK.
A snap poll after the BBC debate showed that the public judged Johnson as less trustworthy than Corbyn by a margin of 38 percent to 48. Those findings are limited by the sample and meaning of the question. It is possible, though, that Johnson and his party may have been successful because of the popularity of their policies but that Mr. Johnson was not successful in securing trust from UK citizens. The conflict between popularity of policy and distrust could result in political instability.
Trust between people of different cultures, religions, and races is essential for the success of democracy. There were allegations of Islamophobia and antisemitism by both parties in this election. While both leaders apologized, there remain questions about whether those apologizes and the parties have solved the apparent violations of trust. There was also a proliferation of allegations of deception and misbehavior by both main parties. These could fuel the propensity for people with different political affiliations to distrust each other and to distrust others with opposing views. And having a government with a reputation for untrustworthiness could make it difficult for the UK to achieve a positive exit from the EU because it undermines negotiation.
Paul James Cardwell, Professor of Law, University of Strathclyde ; Costas Milas, Professor of Finance, University of Liverpool; Hanna Szymborska, Lecturer in Economics, The Open University; Helen Parr, Professor of History, School of Social, Global and Political Studies, Keele University; Katy Hayward, Reader in Sociology, Queen’s University Belfast; Ken Rotenberg, Professor in Psychology, Keele University; Kevin Albertson, Professor of Economics, Manchester Metropolitan University; Sean Kippin, Lecturer in Politics, University of Stirling, and Victoria Honeyman, Lecturer in British Politics, University of Leeds