Labour plan REVEALED: How Corbyn could ‘UNDERMINE’ UK investment flows for YEARS
The UK’s snap election will commence on Thursday, December 12 as 650 MPs get elected to Parliament for the next five years. The election result will shape the UK’s economy for generations to come, with Brexit still looming and new trade deals ready to be made.
Depending on the election result, the UK’s economy could be in serious trouble, an expert has revealed.
Bethel Loh, Macro Strategist at online financial trading broker ThinkMarkets told Express.co.uk a Tory-led Government would be better for the nation’s economy.
Mr Loh said: “An outright Tory majority would finally see Brexiteers fulfil much of their hearts’ desires and market uncertainty fall to multi-year lows.
“However, the failure to put forward any meaningful fiscal stimulus to anaesthetise the impacts of a hard Brexit, and thereby, support the adjustment period of leaving the EU’s single customs union could be detrimental from 2021 for the UK economy.
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“On the other hand, a Labour majority would allow Corbyn to enact his policies of loose fiscal spending without obstruction, thereby, boosting consumption activity, inflationary pressures and GDP growth in the near-term.”
He added: “In short, a Tory majority provides a better long-term outcome for the UK economy.
“An outright Tory majority would see Boris Johnson eventually ensure a smooth but hard Brexit removing once and for all the Brexit uncertainty which has plagued UK markets for the better part of four years.
“This would be a welcomed development by markets and could see more positive reciprocation than expected.
“GDP growth in the near-term, while less than what would be expected in a Labour majority, is still positive and would be supported by the persistence of lower rates from the Bank of England (unlike in a Labour majority where inflationary pressures force the BoE to switch direction).
“Ultimately, if Johnson can swiftly arrange new trade agreements once leaving Brexit, there’s no doubt that a pro-business Tory majority would be the better outcome.”
Mr Loh further explained there are three scenarios plausible as the election approaches, adding exit polls will impose themselves on Sterling volatility.
He said: “Three scenarios reign plausible as the UK election fast approaches. However, this is clearly Johnson’s election to lose.”
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Below is Mr Loh’s predictions for the economy depending on the election result:
Most likely: Outright Conservatives Majority (70 percent)
- GBP/USD tests 1.3383 owing the move to Boris Johnson’s Brexit resolve from the EU.
- A hard Brexit and less fiscal ease, though, ushers in a higher chance that BoE cut in 2020 and caps Sterling gains.
- FTSE 250 outperforms FTSE 100 as stronger Sterling favours domestics > exporters.
Less likely: Labour-led coalition (25 percent)
- GBPUSD bounces as Remain risks heighten and No-deal risks flatten.
- Labour’s extremely loose fiscal policies provide a boost to near-term GDP growth and strengthens hike bets for the BoE in 2020.
- FTSE 100 Internationals are more protected from Labour’s negative business policies and therefore outperform FTSE 250 domestics.
Unlikely: Conservatives minority (5 percent)
- GBP/USD drops and ultimately stays at low levels under 1.2 as Brexit uncertainty, a dovish BoE and weak GDP growth sustains.
- Bearish growth drives FTSE 250 underperformance relative to FTSE 100.
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