London Daily

Focus on the big picture.
Monday, Jun 22, 2026

The looming UK election is one big gamble for investors

The looming UK election is one big gamble for investors

Brits are being asked to vote in an election that could end years of paralysis caused by Brexit. For investors, there are new risks-whatever the result.

Traders face weeks of tumult ahead of December 12, when the United Kingdom holds its third general election in four years. The vote could end over three years of Brexit uncertainty, or plunge the country's political system deeper into chaos.

Each potential outcome comes with risks for investors. One scenario is another divided parliament and no path forward on Brexit. Or Prime Minister Boris Johnson could wind up emboldened, resurfacing fears of a damaging break with the European Union. The vote could also install a left-wing government led by Labour chief Jeremy Corbyn, which investors worry would mean major structural changes to the UK economy.

"Take nothing for granted in the forthcoming election," Brian Hilliard, chief UK economist at Société Générale, warned clients in a note Tuesday. "Just ask Theresa May," he added, referring to the former prime minister who gambled and lost her majority in a risky snap election in 2017.


Advantage Johnson

Johnson's Conservatives have a solid advantage over Corbyn's Labour Party in early opinion polls. But the British public is sharply divided over Brexit, causing many voters and even some politicians to switch their allegiance to other parties. The pound is effectively trading flat as traders wait for campaigning to kick into high gear.

Investors aren't as shaken by the prospect of a Johnson victory as they were a few weeks ago. That's because the prime minister secured a Brexit deal with the European Union before he called the election, and will ostensibly campaign on getting his agreement through UK parliament. That the European Union agreed to again extend the Brexit deadline to January 31 provides added comfort.

"It looks less likely that Boris Johnson has to campaign on a hard Brexit," said Kallum Pickering, senior economist at Berenberg Bank. He expects Johnson to narrowly win a majority and subsequently get approval for his deal.

Pickering views this as the most favorable outcome for investors, since a Conservative majority would clear the way for market-boosting deregulation and fiscal stimulus in the form of infrastructure spending and possible tax cuts.

But a Johnson win - which would likely be followed by a swift Brexit in January - also poses risks. For one, the exit deal he secured with the European Union would ultimately erect significant trade barriers for many companies operating in the United Kingdom, hurting businesses that would otherwise be propped up by his policies.

Plus, Britain may not be able to work out the huge number of complex trade issues that would need to be resolved by the end of 2020, when a transition period included in Johnson's deal would expire. That raises the possibility that Britain could wind up trading with its biggest export market on highly unfavorable terms.


On the other hand...

For investors, who already face a UK economy on the brink of recession, the alternatives aren't demonstrably better.
The Labour Party, should it wind up in power, may choose to launch a second referendum that could reverse Brexit entirely. That would send the pound and other UK assets soaring. (The pound is currently trading below $1.29. Before the first referendum in 2016, it was close to $1.50.)

But Corbyn's Labour Party terrifies some in the business community. The party's manifesto from 2017, its most recent, says it would "overhaul" regulation of the financial system and nationalize certain "key" utilities. Corbyn has pledged to force large companies to give at least a third of the seats on their boards to workers, and to strengthen unions' bargaining rights.

"The economy and financial markets may either have to cope with a combination of a hardish Brexit and business friendly policies under the Conservatives or a softish Brexit and business unfriendly policies under Labour," Paul Dales, chief UK economist at Capital Economics, wrote Tuesday in a research note. "That limits the upsides for equities and the pound whatever the election result."

Dales thinks that if Labour wins a majority, Brexit would be delayed beyond January 31, after which there's a 50% chance that the party strikes of a deal that would maintain closer ties to the European Union, and a 50% chance of a second referendum.
The calculus changes if Labour doesn't score a majority, and is forced to cooperate with either the Liberal Democrats or the Scottish National Party. That could mitigate the scope of some of Corbyn's reforms.

There's also the threat of another parliament in which no party claims a majority. That would further muddle the picture for Brexit, and mean additional years of uncertainty.

"We cannot exclude the possibility that a general election in December returns another hung parliament in which the Conservative Party leads with a handful of seats short of a working majority," Goldman Sachs economist Adrian Paul wrote in a note to clients Wednesday. The result? More of the dynamics that led to the "current impasse."

Newsletter

Related Articles

0:00
0:00
Close
UK Expands Alcohol Ban Enforcement Using Tagging Technology Ahead of World Cup
UK Invests £50 Million in Critical Minerals Supply Chain Security
UK Appoints Special Envoy on Preventing Sexual Violence in Conflict
UK Introduces Fines for Landlords of Unsafe Rental Properties
Reform UK Leads Opinion Polls as Immigration Debate Reshapes UK Politics
Police Investigate Edinburgh Attacks as Potential Hate Crimes
King Charles to Publish Personal Tax and Royal Household Financial Records
Nottingham University Hospitals Maternity Inquiry Report Set for Publication
Heat-Health Alerts Issued Across London and Southern England Amid Rising Temperatures
UK Economy Shows Pressure From Middle East Conflict Despite Modest Growth
Brexit Anniversary Reignites Debate Over UK Economic and Political Direction
UK Parliament Continues Legislative Work Amid Leadership Transition
Financial Markets Hold Steady After UK Leadership Shake-Up
Andy Burnham Enters Labour Leadership Race With Strong Parliamentary Backing
Keir Starmer Resigns as UK Prime Minister After Two Years in Office
Reform UK MP Lee Anderson to Raise Pension Concerns Over British Coal Staff Superannuation Scheme
UK Parliament to Debate Newborn Screening for Spinal Muscular Atrophy Following Public Petition
Met Office Warns of Water Safety Risks During Heatwave as Temperatures Peak in England
Treasury Increases Mileage Allowance Payments for 2026–27 Tax Year to 55 Pence Per Mile
UK Government Raises Electricity Generator Levy to 55 Percent in New Revenue Measure
House of Lords Moves Financial Services and Markets Bill to Committee Stage Amid Regulatory Scrutiny
Westminster Hall to Debate Petition on Pro-Israel Influence in UK Politics
UK Parliament Prepares for Estimates Days Debates as Backbench Business Schedule Approved
Armed Forces Bill Nears Final Stages in UK House of Commons With Military Justice Reforms
Donald Trump Comments on UK Political Situation, Citing Immigration and Energy Policy Concerns
Andy Burnham By-Election Victory Fuels Speculation Over Potential Labour Leadership Contest
UK Economy Shows Resilience but Faces Headwinds from Middle East Tensions, UK Finance Says
UK Parliament Opens Week of Debates on Net Zero, Security and Armed Forces Reform
Met Office Issues Amber Extreme Heat Warning as Temperatures Expected to Reach 35C Across England and Wales
Prime Minister Keir Starmer Faces Mounting Leadership Pressure After Makerfield By-Election Defeat
London Hotel Wins World’s Best Afternoon Tea Award at International Hospitality Guide La Liste
Court of Appeal Rules in Favour of Competition and Markets Authority in Phenytoin Drug Case
Chichester Waste Site Suspended After Environment Agency Finds Serious Fire and Pollution Risks
UK Appoints Chris Elmore as Special Envoy on Preventing Sexual Violence in Conflict
Environment Agency Fines Yorkshire Firms Nearly £470,000 for Environmental Permit Breaches
British Chambers of Commerce Says Post-Brexit Trade Deals Have Limited Economic Impact
Resident Doctors to Vote on Government Pay Offer in Ongoing NHS Dispute
UK Public Borrowing Reaches £46.3 Billion in Early Fiscal Year, Driven by Debt Interest Costs
UK Government Unveils £100 Million Package to Strengthen Fire and Rescue Response Capacity
Bank of England Holds Interest Rates at 3.75 Percent Despite Easing Inflation
Met Office Extends Amber Heat Warning as Temperatures Forecast to Reach 38C Across Southern England
Prime Minister Keir Starmer Expected to Resign Amid Mounting Labour Party Pressure
UK Government Tightens Procurement Rules to Prioritise National Security and Supply Chain Resilience
National Drought Group Reviews Water Supply Risks After Dry Spring and Ongoing Heatwave
Andy Burnham Faces Leadership Speculation After Weak Local Election Results for Labour
Charity Commission Appoints Interim Managers to Barnabas Aid Amid Financial Investigation
Government Awards £27 Million Leonardo UK Contract to Maintain Military Aircraft Fleet
Environment Agency Suspends Chichester Waste Site Permit Over Fire and Pollution Risks
Border Force Seizes Record Cannabis Shipment in Major UK Criminal Network Disruption
Lloyds Banking Group to Hire 300 Artificial Intelligence Specialists in Digital Expansion Push
×