UK Election 2017 - 3 days to go

Following the dreadful terrorist events around London Bridge on Saturday night, the PM made it clear that Thursday’s election will go ahead as planned, and national campaigning has restarted. It is not clear whether the attacks will have any bearing on the result. We suspect that they will not, but cannot be sure.

Last week closed with the televised audience Q&A session, featuring Theresa May and Jeremy Corbyn in York. Both of them looked uncomfortable at times. Mrs May was given a hard time over the government’s various policy U-turns, while Mr Corbyn looked less than happy while outlining his view of the UK’s nuclear deterrent. Perhaps the winner was the audience, which asked the questions. Again we judge that this will not have a definitive bearing on the election outcome itself.

In 2015, the Tories’ share of the vote was 6½% greater than Labour’s, while they won a parliamentary majority of 12. Over the past week, opinion polls have continued to show a wide divergence on party support. They range from a low double digit lead for the Tories (e.g. ComRes and ICM) to a virtual dead heat (Survation’s poll in yesterday’s Mail on Sunday put the Conservatives just 1% ahead). The main reason for these discrepancies is that the pollsters have adjusted their methodologies following their failure to predict David Cameron’s victory in 2015. In short, each organisation is now using different factors to account for this error. Some adjust their turnout assumptions for the younger age cohorts. 18-24 year olds, for example, tend to be relatively inclined to support Labour, but are less likely to go out and vote. Hence this can make a significant difference to poll results, as can other, more complex factors.

In our view, what this means is that poll averages, or polls of polls as they are sometimes known, may not help much. These can be useful when polls differ because of ‘statistical sampling error’, which can be reduced by taking a simple average. But where systematic errors have been made, one has to identify the poll which best corrects for them, which of course is unknown until Friday.

A different type of model was released by YouGov last week, which calculates seat predictions using both voting intentions and demographic breakdowns. This showed a hung parliament, with the Conservatives the largest party, but with 310 seats, 16 short of a majority. A modest sell-off in sterling followed. The current version is little changed (the poll is published daily), with Mrs May’s party on 305. In short the parliamentary outturns suggested by polling companies range from no overall control (with the Tories having the largest number of MPs), to a Conservative majority of around 70. Our own forecasts have been based on a Conservative majority of around 50, and we will look at our currency projections etc. again at the end of the week if there is a materially different outcome.

As for the mechanics on the night, polling stations close at 10pm, although people who are still queuing to cast their ballots at that time will be allowed to vote. At that time it is likely that there will be a broadcasters’ exit poll. The exercise in 2015 correctly predicted that the Conservatives would comfortably be the largest party, but not that they would gain a (small) overall majority. The first constituency result should be ready close to 11pm (probably Houghton and Sunderland South) with a large volley of results from around 2am. Key ‘bellwether’ constituencies typically include Loughborough and Nuneaton. However we would not be surprised to see a number of idiosyncratic factors this time which may mean that the usual pointers are less reliable than usual. Of course if the result is very close we may not know the shape of the government until well into Friday morning and well beyond then if there is a hung parliament.

Philip Shaw, Chief Economist

5 June 2017

For more information as to how to manage your risk before the election, give us a call on: +44 207 597 4681.

UK Election 2017 – 8 days to go

We are now into the home strait for the UK election, set to take place in just over a week’s time on 8 June. That race is now looking more interesting with the Tory lead having fallen away further and with Labour gaining momentum, according to recent polling.

On the 18 April 2017, when the 8 June vote was called, the Tory poll lead averaged around 20%. It has since drifted down to average 11%; that polling average implies a 50 seat Tory majority, from the 17 seat working majority that the Conservative party ended its recent term with. The narrowest Tory lead to date emerged in a 26 May YouGov poll for The Times which showed the Conservative lead down to just 5 points, implying just a two seat majority.

The field work for the 26 May YouGov/The Times poll was undertaken 24-25 May, capturing the period immediately after the devastating Manchester Arena bombing and coinciding with the related pause in campaigning. Since then, we have seen a further six polls released and almost all point to a rise in support for Labour and most to a loss in Conservative support. Interestingly the Conservative lead ranges from 6% to 14% in these polls, representing a range of possibilities over whether the Conservatives are headed for a very tiny majority in the House of Commons to a standing in which the party notably extends its majority. Note that after the polls wrongly overstated Labour support and understated Conservative support in the 2015 election, most polling organisations have adjusted their methodology. Only next week, once the General Election results are clear, will we know whether this has improved accuracy or led to a new set of polling quirks. Note that the bookmakers’ odds still overwhelmingly favour the Tories emerging with an overall majority (1/6, source oddschecker).

The Tory manifesto launch on 18 May looks to have been the major driver of the Conservative party’s slide in the polls, at Labour’s advantage. Indeed, over the past week, Prime Minister May has struggled to side-step persistent questioning over the Tory party’s u-turn on social care funding. Furthermore, YouGov research on what members of the public remember from the manifestos, shows memories centred on social care funding, whilst for Labour 32% of people recalled the promise to axe tuition fees, 21% remembered promises to increase NHS funding and 20% recalled promises to nationalise the railways, Royal Mail or National Grid.

Prime Minister Theresa May is widely reported as aiming to use the final week of campaigning to shift the election debate back onto what she sees as home turf, the issue of Brexit. Here she will seek to re-iterate her message that she, and her Conservative government, is the only one to entrust Brexit negotiations with.

With just over a week to go, we are also into the final stretch of the pre-election broadcast coverage. The Andrew Neil interviews will continue with Lib Dem leader Tim Farron’s taking place at 7pm on 1 June. There will be a BBC Question Time leaders' special on Friday at 8.30pm, in which Theresa May and Jeremey Corbyn will again be facing an audience. It will be followed by another Question Time special Sunday teatime with the SNP's Nicola Sturgeon and Liberal Democrat leader Tim Farron. Finally, this will be followed by election questions on the BBC with UKIP’s Paul Nuttall, the Green Party’s Jonathan Bartley and Plaid Cymru’s Leanne Wood, also on 4 June.

Victoria Clarke, Economist

30 May 2017

For more information as to how to manage your risk before the election, give us a call on: Foreign Exchange 0800 055 6339 | Deposits & Cash Management 0207 597 4064 | Fund Solutions 0207 597 3684.

UK Election 2017 – 17 days to go

With just over a fortnight to go until polling day, attention has turned to the Labour and Conservative manifestos, both officially published last week.

In terms of key points, voters seem to like Labour’s idea of renationalising the railways. This author though does question how many people actually remember state-run ‘British Rail’ in the 1970s and 80s. Meanwhile the Conservatives have tried to position themselves as interventionist and middle of the road. They have committed, for example, to greater controls on executive pay and placing a cap on standard energy tariffs.

But what has grabbed most media attention is the party’s new policy on social care costs. In short, the proposal involves scrapping the 2014 Care Act, which would have limited personal contributions to individuals’ elderly care to £72,000 in 2020. Instead the manifesto suggested removing the cap, but exempting the first £100,000 of each estate. The reaction in the media has been largely negative. Indeed rumours are already circulating that the Tories will perform a U-turn if elected and propose a cap in a Green Paper.

The net effect in opinion polls has been a further erosion of the Tories’ lead over Labour. Four recent polls show the margin falling to between 9%-12%, down from around 15% the previous week and from close to 20% at the start of the campaign. Of course, this will shift from week to week. We have occasionally pointed out parallels with the election in June 1983. Respected pollster Matt Singh points out that at a similar stage in the ‘83 campaign, the Tory lead fell back to similar levels for a while, before recovering again. The final result saw the Conservatives winning by a margin approaching 15%. Its overall parliamentary majority was 144 seats.

A key motivating factor in the PM calling an early election was to bolster the government’s majority at Westminster to prevent Tory rebels from being able to derail legislation, especially on Brexit issues. A 9% lead on 8 June would result in a 40-45 seat majority, assuming a uniform national swing. This would probably be sufficient. But investors might well question the effectiveness of a future government were the Conservatives’ lead to dip further into single digit territory. Indeed this may already be happening. Sterling is looking soggy this morning, dipping below $1.30 despite general USD weakness.

Over the coming week, a number of TV interviews will take place involving party leaders, although the PM remains opposed to participating in head-to-head debates. But in terms of a general strategy, we expect the Conservatives to focus on what they see as their two biggest assets. These are their own leader Theresa May and Labour leader Jeremy Corbyn.

Phil Shaw, Chief Economist

22 May, 2017

For more information as to how to manage your risk before the election, give us a call on: Foreign Exchange 0800 055 6339 | Deposits & Cash Management 0207 597 4064 | Fund Solutions 0207 597 3684.

UK Election 2017 – 24 days to go

The 8 June UK General Election is now only three and a half weeks away. Polling results over the past week have shown the Conservatives holding a commanding lead of between 14-18%, a similar range to last week, suggesting the Conservative party is still well on track to extend its majority in Parliament.

Over the past week the focus has been on policy pledges of the main parties, despite the absence of (formally) published manifestos by either the Conservatives or the Labour party. Note that the Conservative Party manifesto is expected imminently.

The Labour Party’s draft manifesto was leaked last week setting out in print how far to the left the Party has moved under leader Jeremy Corbyn. The draft manifesto included pledges to take control of the National Grid and re-nationalise the Royal Mail, whilst a Ministry of Labour would be set up and trade unions strengthened. Fiscally, there were plans to gradually increase Corporation tax to 26% whilst over the past weekend Labour has said it would introduce a financial transaction tax. Unsurprisingly, the Conservative manifesto looks set to take further steps to the centre ground, seeking to widen the party’s appeal ahead of the 8 June vote. Indeed, moving further into the mid-ground, the Conservatives are set to make promises of statutory time off to care for sick and elderly relatives whilst Prime Minister Theresa May will commit to raising national living wages in line with average earnings until 2022.

Despite the focus moving onto manifestos and policy pledges, Brexit preferences are likely to continue to loom large in the 8 June race. A YouGov poll taken between the end of April and the start of May, shows that Brexit opinion in the eleven months since the referendum has divided into three groups; those that have continuously favoured leaving the EU, those that continue to favour remaining and those that voted to remain last June, but now believe the government is right to pursue Brexit after the outcome of the referendum (‘re-leavers’). Opinion is now solidly in favour of Brexit progressing, with the hard leavers and the re-leavers together polling at 68%. In this context we expect the Conservatives to seek to ensure Brexit remains a key theme of the election debate, peddling the line that they are the only party with which to entrust the UK’s Brexit fortunes.

Looking to the week ahead, aside from the focus on manifesto releases, we are also set to move into the TV debate phase:

  • Indeed, ITV has said it will hold an election debate on 18 May at 8pm with leaders from all seven major political parties invited to attend; Mr Corbyn and Mrs May could be empty chaired as they have indicated that they will not take part in this debate.
  • Throughout the week of 22 May, BBC One will air a series of prime time interviews at 19:00 BST, with one-to-one interviews with Theresa May (Conservative), Jeremy Corbyn (Labour), Tim Farron (Liberal Democrat), Paul Nuttall (UKIP) and Nicola Sturgeon (Scottish National Party) broadcast in England, Wales and Scotland. A sixth interview with Leanne Wood (Plaid Cymru) will air on BBC One in Wales.
  • Then on 31 May there will be a debate between senior party figures on BBC One, followed by a Conservative and Labour leaders Question Time special on 2 June.
  • Tim Farron and Nicola Sturgeon will face voters in a BBC Question Time special hosted by David Dimbleby live on 4 June.

Victoria Clarke, Economist

15 May 2017

For more information as to how to manage your risk before the election, give us a call on: Foreign Exchange Desk - 0800 055 6339 | Cash Management Desk: 0207 597 4064.

UK Election 2017 – 31 days to go

This is the third in our weekly series of short notes ahead of the UK’s General Election.

As we write, the 2017 General Election is precisely one month away. Opinion polls during the past week have told a similar tale to the previous week. However most polls now show the Conservatives with a 15%-19% lead over Labour. So if anything their margin over Labour has narrowed slightly.

Last Thursday saw local elections in England, Wales and Scotland. These were a clear victory for the Tories who won a (net) 554 seats and a blow for both Labour (down 321) and UKIP (down 119, winning just one seat). The Lib Dems saw a mixed performance, edging back by 32 seats. Trying to translate this performance into a General Election outcome is difficult. First, electors often vote differently in local elections from national ones. Second, not all areas of the UK voted last week - hence the results have to be analysed from the bottom up. Third, even if one does this, the ‘base’ comparison is the May 2013 local elections, not the 2015 General Election. Fourth, there are a number of nuances to take into account. For example, Scottish local elections use the Single Transferable Vote (i.e. numbered preferences), not ‘first past the post’.

A study by well-known psephologists Rallings and Thrasher in 400 Council wards (electoral areas) suggests the results fall short of implying a Tory landslide. Their conclusion is that on Thursday’s voting patterns, the party’s overall majority in Westminster would be 60. Bearing in mind the gulf in approval ratings between Theresa May and Jeremy Corbyn, 8 June may well see the Conservatives outperforming their results last week. Indeed the 1983 and 1987 General Elections both took place in June and followed local elections in May. According to pollsters YouGov, the Conservatives beat Labour by 3% in the locals in 1983 but by 16% at the General a month later. In 1987, the equivalent margins were 6% and 11%.

While people’s perceptions of the party leaders will be a major factor behind their voting intentions, it is worth bearing in mind that the parties’ manifestos are due for release at some stage soon. A key issue will be taxation. So far the PM has refused to commit to avoiding income tax increases (the so-called tax lock), which her predecessor David Cameron did in 2015. On the BBC’s Andrew Marr show a week or so ago, Mrs May seemed to hint that this pledge could be dropped. Given their large lead in the polls, the Conservatives might minimise the number of ‘populist’ pre-election pledges in order to make their lives easier in the next parliament, if they win.

Labour meanwhile is promising that individuals earning less than £80k per annum would neither be subject to higher income tax nor National Insurance Contributions. Yesterday Shadow Chancellor John McDonnell announced that higher earners would be asked to contribute towards Labour’s plans for higher spending. The details are set to be announced in Labour’s manifesto.

In short, there has been little to shift the broad view that the Tories are set to win a large majority in a month’s time. But it is very difficult to determine if ‘large’ means 60 or 150.

Phil Shaw, Chief Economist

8 May, 2017

For more information as to how to manage your risk before the election, give us a call on: Foreign Exchange Desk - 0800 055 6339 | Cash Management Desk: 0207 597 4064.

UK Election 2017 – 36 days to go

This is the second in our weekly series of short notes ahead of the UK’s General Election.

We have just over five weeks to go until the 8 June General Election and with Parliament set to be dissolved this Wednesday ahead of the vote, we expect the pre-election campaigning to move into full swing. We have not seen any manifestos published yet, so we expect the parties to continue working towards these and clarifying campaign messages over the coming days. Reports suggest that the Conservative party has pencilled its manifesto release in for 8 May, though it could slip to later that week.

Over the past week we have seen a flurry of polls released which continue to point to the Conservative party holding a decisive lead in public opinion, though by very modestly less than a week ago. The latest ICM poll put the Conservative party on 48% (unchanged) and Labour on 27% (up 1 point on the 21 April poll) whilst the YouGov poll released 21 April had the Tories on 48% (unchanged) and Labour at 25% (up 1 point on the 19 April count). The Liberal Democrats have been polling at around 10-12% in polls from the last two weeks, with UKIP between 5% and 11%.

In Scotland, the Conservatives have been drawing on data showing that more Scots are against another Scottish independence referendum (than in favour), at this time. The Tories are using this to try and draw support away from the Scottish National Party (SNP). At the 2015 election the SNP won 56 out of 59 Scottish seats in Westminster. A projection from YouGov last week, gave the SNP 47 seats, the Tories eight, the Liberal Democrats three and Labour still with only one MP, after the June 8 vote. The Tories took only one seat in 2015 (Dumfriesshire, Clydesdale and Tweeddale).

This week, on Thursday 4 May, local government elections are taking place in England and Wales, council elections in Scotland, and mayoral/combined mayoral elections in various locations including Greater Manchester and the Liverpool City Region. We expect much to be made of the results of these votes, so close to the 8 June election. One word of caution however is that, typically, opposition parties do better at local elections than in general elections. The exception is where local elections are held on the same day or close to a general election, as voters more often vote for their preferred governing party. In 1983, although a general election had not been called, there was speculation that Margaret Thatcher would do so soon and in 1987 Labour prepared advertisements and a slogan for a May election. In both contests, voters behaved much more like a general election, not a local one. Hence, we expect there to be significant general election analysis to follow from Thursday’s local results.

Finally, note that Prime Minster May has had a difficult week in Brexit talks. First there were the leaked reports that her private meeting with European Commission President Jean-Claude Juncker went less than swimmingly; Mr Juncker reportedly told her that ‘the EU is not a golf club’ that could not easily be joined or left. Separately, the starting gun was fired in Brussels as EU leaders held their first Summit on Brexit tactics agreeing to play tough with UK negotiations, setting out several hurdles to be passed before discussions over trade talks can commence. One question is whether this media coverage sours support for Prime Minister May at all, or threatens Conservative campaign claims that the Tories are the only party to take Britain safely through Brexit negotiations.

Victoria Clarke, Economist

3 May 2017

With the French and the UK elections on the horizon, now might be the perfect time to give us a call to help manage your risk. Foreign Exchange Desk - 0800 055 6339 | Cash Management Desk: 0207 597 4064

UK Election 2017 – 43 days to go

This is the first in a weekly series of short notes ahead of the UK’s General Election.

We now have just over six weeks to go until 8 June when, including referendums, the UK will stage the fourth major vote in as many years. The Conservatives’ huge lead in the opinion polls would surely tempt any Prime Minister to call for a snap election, well ahead of its previously scheduled date in 2020. More of a surprise was the lack of resistance by the Labour Party, which could easily have vetoed the poll. The Fixed Term Parliament Act specifies that a two-thirds majority in parliament is necessary for an early election to take place. In the end, it was backed by 522 MPs and rejected by just 13.

In this context a new abbreviation is the INLBs. This stands for ‘I’m Normally Labour But…’, the ‘But’ referring to leader Jeremy Corbyn, whose approval ratings remain close to historical lows. The INLBs appear to be a significant factor behind Labour trailing the Tories by around 20% in most polls (some show a bigger deficit), compared with a Conservative lead of 6.5% at the 2015 election. On this admittedly simplified basis, there are 56 of the 650 constituencies where the Tories were second to Labour by a margin of less than 14%. If the Conservatives won these seats and no others changed hands, they would win an overall majority of 122.

In terms of separate dynamics, UKIP is struggling, averaging 8% in the polls (2015 share 13%). Indeed many observers note that the Conservatives are picking up Labour voters that might otherwise have drifted to UKIP. Meanwhile the Liberal Democrats are faring better than in 2015 (average poll rating of 11% compared with 8% two years ago). Additionally the Lib Dems have scored a number of spectacular by-election successes at local authority level which could be a straw in the wind for June. They might also pick up some Tory seats in areas where there was a strong ‘remain’ vote at last year’s EU referendum (their parliamentary by-election win at Richmond Park last December, is a good example). There have also been signs of a resurgence of the Conservative Party in Scotland. They currently hold just one of the 59 seats there (the SNP won 56 in 2015) and could well boost their presence there after 8 June.

As in every election there are many nuances to consider in looking at the electoral arithmetic. But overall it seems sensible to expect the Tories to capitalise on their current standings and win a large majority in six weeks’ time. On conservative (small ‘c’) estimates this could be 75, but it might easily be double that. Accordingly while we do not consider that the early election is a reason to shift our economic forecasts, a combination of a hefty majority and a shift back in the subsequent election to 2022, should remove some of the potential banana skins in the PM’s Brexit negotiations.

Philip Shaw, Chief Economist

24 April 2017