Theresa May's volte face

In an astonishing change of heart, Prime Minister Theresa May confounded expectations by announcing a “snap” General Election to take place on Thursday 8 June. Her surprise decision came less than three weeks after she triggered Article 50 of the Lisbon Treaty to begin the formal process of leaving the European Union (EU). Previously, Mrs May had stated that the next General Election would not be held until the end of the current Parliament in 2020. However, “recently and reluctantly”, she changed her mind, citing her view that “division in Westminster will risk our ability to make a success of Brexit”. Under the Fixed-term Parliaments Act of 2011, the Government can call a General Election either by losing a no-confidence vote, or by voting for an election with a two-thirds majority in the House of Commons. Mrs May opted for the latter course. In the end, MPs in the Commons voted by 522 to 13 in favour of an early General Election. A stronger majority in the House of Commons would provide Mrs May with the additional strength to push through her Brexit legislation. In her speech announcing her decision to hold a General Election, she stated, “There should be unity here in Westminster but instead there is division”. Although her decision is not without risk – a Tory victory is not a foregone conclusion – the risk appears to be a calculated one and the timing is good. A recent poll by YouGov for The Times newspaper indicated the Conservative Party is more than 20 points ahead of Labour, its nearest rival. Having assumed power in 2016 after David Cameron’s resignation in the wake of the Brexit referendum, the snap election gives Theresa May not only an opportunity to win a direct mandate, but also to campaign with a fresh Conservative Party manifesto that will focus on her own policies. With key elections in Germany, France, and the Netherlands – not to mention Brexit and the new Trump administration in the US – 2017 was always likely to be a year of political change and potential upheaval. The UK’s snap General Election will only add to the prevailing uncertainty. Political uncertainty, however, creates uneasiness in financial markets, and uncertainty amongst investors is likely to lead to heightened levels of market volatility over the next few weeks.