Insight

UK election results: what comes next

June 2017

In a shocking twist, the UK election on June 8 resulted in a hung parliament. The outcome has churned up a high level of uncertainty around the impacts on business and the Brexit negotiations—due to begin just 11 days after the election.

Events continue to move apace, but a summary of the key points, policy implications, and likely next steps are below.

Who will govern the UK?

  • The Conservatives remain the largest party and will have the first attempt to form a government which can command the confidence of the House of Commons and have a working majority.
  • UK Prime Minister Theresa May has said that she intends to form a government based on an agreement with Democratic Unionist Party (DUP), creating a functional majority of 328 MPs.
  • They will face stiff opposition from the Labour Party, who is likely to be able to bring significant figures from its backbenches into the shadow cabinet. But there will be pressure on them to develop a clearer position on Brexit than they previously took.
  • There is a strong chance of a Tory leadership election in the next few months. Speculation on a future leader begins today.


What does this mean for Brexit?

  • A softer Brexit suddenly looks more likely. Although the pro-Leave DUP will support the Conservatives, the Remainers in the Conservative party may now insist on softening the Conservative's line.
  • That might, for example, mean remaining in the Customs Union and a more pragmatic stance on capping immigration. Commitments in the manifesto could be dropped.
  • Government civil servants are looking at the legislative program only on the basis of areas that will receive cross-party backing.


What does this mean for business?

  • Business leaders need certainty, whether they are ensuring supply chains are working effectively or planning to invest in the future.
  • The shocking general election result will both increase and prolong economic uncertainty: sterling dropped sharply overnight, down 2% on the dollar at just under $1.27 and nearly 2% against the euro at 1.1344.
  • In order to balance long-term strategic objectives with a feasible route to achieving them, business leaders will need a clear idea of the risks facing their companies and a wide range of strategies to mitigate them.


This is the second article in a series tracking developments as negotiations between London and Brussels unfold. You can view the first article here.  As we reach key milestones, we will provide more insights into what these mean for business. Stay tuned.

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