Boris Johnson became Prime Minister of the UK on 24th July, defeating Jeremy Hunt in the Conservative leadership race and famously declaring that ‘do or die’ the UK would leave the European Union on 31st October.
Parliament and the courts had other ideas and eventually – with the support of the Liberal Democrats and the SNP – the Fixed Term Parliament Act was overturned, and a General Election called for Thursday 12th December.
It would be the first December General Election since 1923 – an election which resulted in the UK’s first Labour government, with Ramsay Macdonald’s administration propped up by the Liberals. As we all now know, history did not repeat itself, the Conservatives winning with 365 seats and a majority of 80.
Whatever your feelings on Boris Johnson, the result was a considerable personal triumph. With all 365 Tory MPs having pledged to support his agreement with the EU – and the Labour party set to spend time considering its future direction – he now enjoys a position of considerable power. If he has any opposition, in the short term at least, it will come from Nicola Sturgeon and the SNP.
So what will the Prime Minister do with his power? In this Special Report for our clients – written over the weekend of 14/15th December – we look at the result of the General Election, what will happen now, the implications for Brexit and what it will all mean for your savings and investments.
Throughout the campaign, the opinion polls had – on average – given the Conservatives a ten point lead, although that lead appeared to narrow as polling day neared. No one doubted that the Conservatives would be the largest party – but would they get the 326 seats needed to secure a majority? Or would the UK once more find itself with a hung parliament?
Any doubts were dispelled the minute Big Ben finished chiming 10pm and the exit poll was released. The poll was predicting 368 seats for the Conservatives, 191 for Labour and 55 for the SNP – resulting in a Conservative majority of 86.
Confirmation of the exit poll’s accuracy came an hour-and-a-half later as Blyth Valley in County Durham – a seat where Labour had a 17,000 majority in 1997 – fell to the Conservatives with a 10% swing. Roughly 5½ hours later, Dennis Skinner lost the Bolsover seat he had held since 1970 to give the Conservatives the 326th seat they needed for a majority.
The final result, showing seats won by the major parties, their percentage of the votes cast and total votes cast, was as follows:
Liberal Democrat leader Jo Swinson lost her seat and Jeremy Corbyn – roundly blamed by many Labour MPs and former MPs – will stand down as the party’s leader. As we write this section of the report, former Shadow Chancellor John McDonnell has announced that he will quit the shadow cabinet.
The Victory Speech
As we wrote above, the result is a remarkable personal triumph for a politician who has been written off many times. In his victory speech, Boris Johnson was magnanimous: “Let the healing begin,” he said.
Saturday lunchtime saw him visiting Sedgefield – famously the former constituency of Tony Blair and which returned its first Conservative MP for 84 years – as he thanked voters in the North for their support. In particular, he spoke to people who were not “natural Conservatives … whose hand may have quivered over the ballot paper before you put your cross in the Conservative box.”
All the PM’s speeches over the weekend were conciliatory in tone – and if there was one phrase Johnson used as much in the campaign as ‘Get Brexit Done’ it was ‘One Nation Conservative government.’ So – despite winning a Conservative majority on a scale not seen since Margaret Thatcher – we can probably expect a very different style of leadership. As one writer in the Telegraph put it, Johnson is ‘much more Michael Heseltine than Margaret Thatcher.’
What were the Conservative’s key promises?
Many commentators described it as a ‘steady as you go’ manifesto. The Prime Minister talked about wanting to get a lot done in his first 100 days (which takes us up to March 22nd). The commitment to increase funding for the NHS will be enshrined in law, an Australian points-based immigration system will be introduced, and there will be major investment announced in the North and Midlands as Boris Johnson delivers on his pledge to upgrade the nation’s infrastructure and spread opportunity more evenly.
Sajid Javid’s first Budget will deliver on the election promise to raise the national insurance threshold to £9,500 a year, which will give a tax break worth just under £100 a year to 31 million workers. We can surely also expect some major reforms to the business rates system in a bid to protect the national high street.
What happens now?
One immediate result of the General Election may be that Her Majesty has to amend her pre-Christmas plans on Thursday 19th: she will now be delivering another Queen’s Speech. This one will, we are promised, feature much less pomp and circumstance and it will confirm many of the manifesto promises and initiatives we have outlined above.
The Withdrawal Bill will almost certainly be brought back to Parliament before Christmas and – as Lord Heseltine has conceded – it will not face any opposition in the House of Lords. It will need to have been passed by 29th January so that it can be ratified by the EU, and the UK will formally leave the European Union at 11pm on Friday January 31st 2020.
Looking further ahead, the Sunday papers are promising a Cabinet re-shuffle with up to a third of the present Cabinet axed. Ministers will be chosen for their ability to deliver results, rather than their ability in front of a TV camera. Sajid Javid’s first Budget is now expected in ‘late February or early March’ – which might suggest Wednesday 26th February or 4th March. And the Sunday Telegraph reported that Boris Johnson’s chief aide, Dominic Cummings, will spearhead a radical reform of the civil service to ensure the PM’s agenda is delivered.
There will, unquestionably, be plenty of changes in the weeks and months ahead.
How has Europe reacted?
There are probably three words to describe the reaction in Europe: ‘sadness,’ ‘acceptance’ and ‘relief.’ German legislator Norbert Röttgen – an ally of Angela Merkel’s – summarised the mood with his tweet: “The British people have decided and we have to accept their choice. With Johnson’s victory, Brexit has become inevitable. Our goal now is to keep relations with the UK as close as possible.”
The sadness and acceptance at the UK’s decision was, though, also met with relief. Clearly the trade negotiations will not be easy – you suspect that fishing rights will be a particular sticking point. But the EU now knows that what is agreed in the negotiations – and the rumours over the weekend were that Michael Gove will be in charge of them – will also be agreed by parliament.
One phrase you will undoubtedly hear many times as the negotiations progress is a ‘level playing field.’ Boris Johnson is now in a very strong position with regard to the EU. President Trump has already sent his congratulations and said he looks forward to a ‘massive’ trade deal between the US and the UK. And what the EU does not want, above all things, is what’s colloquially been called ‘Singapore on Thames’ – a low tax, low regulation competitor right on its doorstep.
What does this mean for Brexit?
It means, very simply, that the UK will leave the European Union on 31st January 2020. There will then be a ‘transition period’ where a trade deal is worked out, with Boris Johnson committed to having that deal completed and ratified by the end of 2020. There were plenty of calls over the weekend – from Remain supporters – for that transition period to take much longer (up to five years) but we cannot see it not being completed on time, given the Prime Minister’s commitment.
With the size of the Conservative majority, the European Reform Group of hard-line Eurosceptics may not be the force it once was, but you suspect there will be a willingness on all sides to get the negotiations completed. If the British people wanted to ‘Get Brexit Done,’ so too does Europe now that it has become inevitable.
What will the result mean for my savings and investments?
Both the pound and the FTSE-100 index rose on the news of the Conservative victory. The pound moved sharply upwards as soon as the exit poll was announced and, having finished November trading at 1.2934, it is now trading (as we write on Sunday morning) at $1.3326 – a rise of 3% compared to the end of November.
The FTSE-100 also rose on the election news and was up by 1.10% on Friday (with the more UK-focused FTSE-250 index up by 3.44% to an all-time high). The FTSE-100 had drifted lower in the run-up to the election and closed Friday at 7,353 – up just six points on the level at which it closed November. As we finish this report on Monday morning, though, the FTSE is up by 1.62% in early trading.
With Boris Johnson launching an ambitious programme of investment in the UK and President Trump calling a halt to any further tariffs on Chinese goods, it will be interesting to see how the stock market performs over the rest of the year. However, even if it does rise, this does not mean that we are guaranteed to see continued growth. There remain plenty of problems in world trade, and there will unquestionably be concern about the scale of the government borrowing needed to pay for all the promised infrastructure projects.
Perhaps the key thing that the election delivers for our clients’ savings and investments – and their overall financial planning – is peace of mind. Yes, markets will continue to rise and fall as they have always done, but it is unlikely that we will see wholesale shocks to the UK’s financial system that we may have seen under a Labour government led by Jeremy Corbyn. Sajid Javid will undoubtedly have one or two surprises in store for us in his first Budget – but we will not see the dramatic changes to personal and corporate taxation that shadow chancellor John McDonnell might have introduced.
As we mentioned above, the Conservative’s manifesto was described as a ‘steady as you go’ document. Armed with his ‘stonking majority’ Boris Johnson has some ambitious plans. But as far as your savings and investments are concerned, we’re delighted to say that for the immediate future, it should be ‘steady as you go.’
Is there any action I should take now?
Yes: you should have a wonderful Christmas. That is not to make a political point: it is, rather, to reinforce the point we made above.
The UK will be leaving the European Union by the end of January: yes, the negotiations that follow may at times hit some bumps in the road. But this election result gives some stability and predictability. It means there will not be the wholesale shocks to the financial system a Labour government might have ushered in. The phrase ‘hung parliament’ can be forgotten.
So no, there is no immediate action that you should take. We will continue to monitor your savings, investments and financial planning as we have always done, and continue to keep you regularly updated. As all our clients know, if you have any questions or concerns at any time, we are never more than a phone call or an email away.
We hope you have enjoyed our reflections on the first December General Election for 96 years – it only remains for us to wish all our clients a very happy Christmas, and a peaceful and prosperous New Year.