Cascade Commentary

Theresa May announced this morning that she would like to hold a UK general election on 8 June 2017 following divisions within Westminster over the Brexit process. May previously opposed a general election stating that the UK needed "certainty, stability and strong leadership" after last year's vote to leave the European Union (EU). Today, however, Prime Minister May indicated that while she believes the country is coming together, she does not feel that Westminster is, which she feels is weakening the country's preparations for Brexit. 

The Government will now propose a vote in the House of Commons to hold a general election in June which, if passed, will lead to parliament being dissolved on 3 May thereby starting election campaigns lasting just over one month. May will need at least two thirds of MPs to vote in favour of a general election, which is expected to be more than achievable as opposition parties have already welcomed the decision. 

Since the announcement, the pound has risen by 1.58% against the dollar to $1.2760, its highest level since December 2016 following expectations that the government will increase its ruling majority, potentially strengthening the Prime Minister's ability to deliver a softer Brexit. The rise in pound sterling has sent the FTSE 100 downwards by 2.18% due to its international exposure and reliance on foreign-based revenues. 

Commentary

Theresa May's decision to apply to hold a general election surprised many today, both inside and outside of Westminster. May was under no obligation to call an election and her decision to do so has prompted speculation over whether or not this will increase the Tory majority as intended. With the country still divided in the aftermath of the EU referendum last year, the Prime Minister runs a risk of losing seats to the SNP, the Labour party or the Liberal Democrats as disgruntled Remainers have felt alienated in the hard Brexit that has been proposed. The polls suggest the Conservatives could extend their lead, but then they suggested a Remain outcome in June 2016 and so many have viewed this move from May as a risky one.  

On the positive side, a general election does allow for Prime Minister May to campaign on her own policies, removing any obligation to follow Cameron's 2015 manifesto. It may also help to heal the divisions in the country as people get to have a say on what Leave will look and feel like, particularly important for those who voted Remain and have felt alienated since. We have not expected any significant headway to be made in Brexit negotiations until the German and French elections have concluded and so there does exist a window of opportunity for May to bravely attempt to strengthen her bargaining position should she win comfortably in a June general election. 

Volatility is likely to remain high with geopolitical tensions increasing worldwide and the general elections across Europe in the coming months. Should you wish to look to utilise a temporary cash haven to weather then storm, then do let us know and we'll be happy to assist.