Surprise Results Spell Uncertainty for the UK

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If the exit polls are close to correct, not only was Theresa May burned by her demand for a snap election, but she might have lit herself on fire after dousing herself in kerosene. The results indicate that not only did she not increase her majority in Parliament, but she lost the majority completely and could be on her way out as Prime Minister. With only 314 seats looking likely according to the exit polls that leaves her short of the majority and well short of the mandate she had promised her party, and the United Kingdom, when calling the elections.

This loss by the Conservatives throws a lot of the UK into chaos, not only politically but also economically as the vision for the future is not very unclear and will remain that way for the foreseeable future. Much of what will happen over the next days will give us some indication as to what to expect for the future, but we can start to peak under the hood a bit to see what to expect.

A Coalition Must Be Formed

Someone is going to have to agree to work with someone and it’s unclear how that is going to play out. While the agreement doesn’t have to be a strict agreement to do everything the leading party would want, either the Conservatives or Labour Party is going to have convince one of the smaller parties to team up with them to elect a Prime Minister and lead the country through the tough decisions it faces.

Each of the parties has some likely friends to look to, but those friends have also not shown a strong willingness to work with them either. Further, with the Conservatives falling in the polls in the recent weeks to get to this point, it might be harder to find that ally. If the Conservatives want to keep May in power, they are going to have to work with the Irish Democratic Unionist Party. This is possible, but it will depend on how many seats the IDP gets in the final election results to determine if it will be enough to form a coalition government. May is in a tough spot, because her rhetoric over the last few months have been to alienate all other parties.

The options for the Labour Party are a bit more open as they could either team with the Scottish National Party or the Liberal Democrats. The issue with both is that neither has shown the willingness to really want to work with other parties. The SNP could be an option if the Labour will promise the SNP another referendum on independence. This is something that the Conservatives have said will not happen until after the Brexit deal is finished. This doesn’t make the SNP happy at all and could be an opportunity to seize on that for the Labour Party. The Lib Dems are not excited to enter into another coalition after what happened last time.

The Economy is Going to Suffer

No matter what happens over the next few days it will not be fast enough to save the economy which has already started to turn down on the exit poll results. Economies and markets hate uncertainty and when a surprise is thrown at them, it becomes even more of a disaster. It’s likely to be a few days or longer until we know what coalitions will be formed and that will greatly influence what the plans for Brexit are going to be. Of course, Brexit is the single biggest question facing most people right now.

Even if the Labour Party is the ones who form the coalition there will still be a great deal of uncertainty facing the markets as the plan they have for the exit is much harder to know. They have not been in the driver’s seat and while their position is known, they still haven’t had to really think about true negotiations up to this point. Until it is completely clear what they are going to be doing the markets are going to be nervous and will likely react to any news a bit more severely than they would normally. It’s going to be a shaky couple of weeks, or possibly months for the United Kingdom.

The Blow to Trump

The blow to the United States cannot be understated either. Many reports have come out that Theresa May was in President Trump’s corner when trying to deal with European leaders, and the loss of his one ally in Europe is going to hurt. If May is not able to cobble together support, then Trump is going to have to go into future meetings without the support of the United Kingdom for certain things, especially when dealing with Germany. The exit from the Paris Accords now loom even larger, as the United Kingdom hadn’t really blasted Trump for leaving. That might change depending on what happens.

It’s Going to be a Bumpy Road

The United Kingdom better be ready for a bumpy ride. It’s not going to be easy to stomach what might happen with the markets, but patience is going to be key. Everyone has interests at stake here, and it’s clear that the population is very split on what things should be happening and how they should be happening. No one has a mandate, and in this kind of electoral system, that should cause everyone to be a bit more reserved than normal.

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