UK Election Night Preview: Polls, timings and things to watch – HSBC

The analysis team at HSBC explains that the UK heads to the polls on 8 June in sombre mood after another terrorist attack and although overshadowed by the news, the weekend polls showed the Conservative lead ranging from just one point (Surveytion) to 12 points (ComRes).   

Key Quotes

“Shortly after the election was called on 18 April, the Conservatives enjoyed a 23 point lead in the polls.  A week before the vote, this had fallen to around seven points (according to the average of the last 15 polls). Assuming a uniform swing across the country, this points to Theresa May extending her majority to the 50-70 seat range, from her current working majority of 17.”  

“But the polls' predictive value is highly uncertain.  As is well-known from errors ahead of the 2015 election and EU referendum, it is getting harder for pollsters to reach large numbers of voters, requiring them to make more assumptions.  As always, turnout is likely to be important.  In particular, if large numbers of younger people vote, this could favour Labour, according to polls.”

“Timings on the night

• Polls open at 07:00 on 8 June and close at 22:00. Exit polls will be published immediately after the ballot boxes close. In 2015, the exit polls were correct in pointing to an unexpected Conservative majority (though they actually slightly underestimated the scale it).
• The first results typically come in just before midnight. In 2015, just over half of all constituencies had reported their results by 04:00.  By 06:00 it was 80%. Clearly, how long it takes to get a clear idea of the final result will depend on how close it is.”

“Seats to watch

We list the top 20 targets for both of the main parties and the times they declared in 2015. The earliest of Labour’s 2017 targets are the Vale of Clywd (4th on the list), which declared at 01.00 in 2015, and Telford at 01:30. For the Conservatives, Derbyshire North-East (02.15), Bridgend and the City of Chester (both 02.30), may be early-ish indicators.  We also identify some bellwethers – the seats that tend to elect the party that ultimately wins the election overall. Dartford tops the table, having predicted the winner of every election since 1964. This may provide some comfort for Theresa May: neither Electoral Calculus nor YouGov sees it going back to Labour this time.”

How could the UK general election affect the Forex market?

Conservative victory with Absolute Majority (Scenario 1)

A Conservative victory with an absolute majority should be supportive initially for the pound. Stock markets would be relieved on the lower corporation tax outlook and a risk-on environment could be the expected outcome. However, with a focus on Brexit and PM May's hardline - "No deal is better than a bad deal" - approach to the negotiations, a hard Brexit outlook could equate to a bearish scenario to the pound eventually - (Note: Remain cautious of a 'buy the rumour sell the fact' trade - a Conservative victory is virtually priced in).

Conservative victory without Absolute Majority (Scenario 2)

With the narrowing of the polls and a trend that has been continuing, the possibility of a hung parliament should not be ruled out, (When no party has won enough seats to have a majority in the House of Commons). Such an outcome could be highly bearish for the pound due to the uncertainty for markets to deal with. However, in a hung parliament, the incumbent prime minister stays in office until it is decided who will attempt to form a new government - this could support the pound after an initial sell-off. (Note: A hung parliament does NOT necessarily mean a coalition government).

Laborist victory (Scenario 3)

A balanced outcome for the pound with initial volatility on the basis of Labour’s manifesto. Initially, a lower pound could be the immediate outcome bias due to increased uncertainty and a reduction of inflows. However, a Labour victory should mean a softer Brexit outlook and austerity would be removed, (Fiscal easing lifting growth and inflation expectations). Higher real yields may offset the initial weakness in the pound.

When is the UK general election 2017?

The United Kingdom snap general election is scheduled for June 8, 2017. The election will elect representatives for the 650 districts that make up the House of Commons, the lower house of the British Parliament.

Theresa May Called for UK Snap General Election

UK Prime Minister Theresa May has announced plans to call a snap general election on May 15th. Explaining the decision, Mrs May said:  "So we need a general election and we need one now. We have at this moment a one-off chance to get this done while the European Union agrees its negotiating position and before the detailed talks begin.”