The odds of Jeremy Corbyn winning 8 June’s election have been slashed by two thirds in recent weeks.
The Labour Party leader has gone from 12/1 when the election was first announced to 4/1 today.
“At the moment this doesn’t appear to be troubling the UK equity market,” writes David Stevenson in Strategic Intelligence this week.
“Investors are still assuming an outright Tory triumph. That’s despite the message from several opinion polls that the result is no longer a foregone conclusion.”
The markets are surprisingly calm about the odds shortening for a Labour win. Investors evidently see the YouGov poll putting Labour just three points behind the Conservatives as a blip.
“Perhaps it is because they don’t believe in polls,” suggests Economist editor Buttonwood, “spread betters are still looking for a Tory majority of over 100.”
“And investors don’t even seem to be considering the possibility that the trend might move further towards Labour, or that the polls are wrong in the other direction (underestimating Labour, not Tory, support).”
Still, if Corbyn manages to pull off what was up to a few weeks ago the unthinkable, we can expect some real wobbles in the markets. A shock election result doesn’t seem to be priced in.
Whether or not investors are right to ignore the polls will become clear in a week.
It’s interesting to see, though, how quickly talk of a Tory landslide has changed to May quite possibly haemorrhaging seats with even the possibility of a hung parliament now being discussed.
Though the words ‘coalition’ and ‘chaos’ are often used in the same sentence in British politics, they’re not necessarily worse than single party governments.
Given the deep divisions that currently exist in British society, a single party may not be enough to represent Britain in the Brexit negotiations.
The good thing about coalitions
Theresa May’s rationale behind calling a snap election was to get a strong mandate from the British people to negotiate in Brussels on their behalf.
But for the Brexit talks a coalition government might actually be more desirable than one party winning an outright majority.
Why? Because I don’t think the British government should be representing just the 51.9% of Brits who voted in favour of leaving the EU.
That’s even assuming everyone who voted for Brexit had the exact same thing in mind. It’s highly unlikely all the Leave voters wanted the clean break with Europe Theresa May is now willing to pursue.
The entire country should be able to move on after Britain has left the EU. Ignoring almost half of the electorate during those negotiations won’t make that any easier.
That’s why a coalition government might actually make more sense.
Take the example of a coalition between the Conservative Party, which now advocates a Hard Brexit, and the Liberal Democrats, who’d rather not leave the EU at all.
If they had to come up with a common strategy for Brexit, neither side is likely to do things exactly as they’d want.
But the compromise that would have to be reached might actually find more support among the British public as a whole than if either side completely got its way.
I don’t buy the argument that only a single party government with a clear majority could get a good deal.
Britain will face 27 countries on the opposite side of the table. If EU member states can find a way to speak with one voice, why couldn’t a British government consisting of more than one party do the same?
The dominant view is still that this is a moot point as just about everyone still expects the Conservatives to win an absolute majority.
But it is rather odd that this close to the election poll predictions still range from a Tory majority of +100 seats to no party winning an outright majority.
It shows this election could be a lot harder to predict than people might think.
A hung parliament is portrayed by some as the worst possible scenario, but a coalition government going into the Brexit negotiations might not be such a bad idea at all.
The British public is still deeply divided over the Brexit issue. Wouldn’t it make more sense to have both sides heard and represented at the negotiations?
It may be the only constructive way for Britain to move forward after it has left the European Union.