UK Elections: What you need to know

The UK general election is underway today, with polls showing the Labour party likely to take an outright majority in the house of parliament.

Today’s election result could put Labour back in power after 14 years of Tory rule. Some polls are forecasting Labour’s victory could one the biggest parliamentary majorities in British history.

One of the main reasons for the shift from Tory to Labour is the desire for change. During the reign of the Conservative party politicians have been wrought buy scandals during the pandemic, war with Ukraine, and high inflation.

Rishi Sunak, the current prime minister, took the job after Lizz Truss was ousted for proposing sharp tax cuts. The pound plummeted, Gilt yields soared, and mainstream media crucified her for proposing the same policies that had made ex-prime minister Margaret Thatcher so popular.

Sunak was elected as the new prime minister by the Conservative party barons without a popular vote. The current prime minister is an ex-Goldman Sachs banker with shares in a fund that has invested heavily in companies that produced the Covid vaccine.

The vote for Labour is seen as a way to get change. Keir Starmer the Labour party leader hasn’t even proposed a clear agenda of policies. His campaign has been based on promises to make government fairer and to stop the chaos.

The FTSE opened slightly higher on the day up 0.4% at the time of writing. While GBP/USD is also slightly bullish, up 0.02%. The markets may feel that, either way, a Labour or a Tory is good as long as there is a majority.

Tail Risk

We may still get a surprise tonight, voting finishes at 10 pm UK time, after which exit polls will be announced. Most polls are placing Labour first by a wide margin, with the Tory party 20 points behind Labour in many polls.

One poll showed that the Tory party may even come in third, behind the smaller Liberal Democrat party. But we have seen so many polls get voting predictions wrong that it wouldn’t surprise me if we get an unexpected result here too.

The most renowned blunder for voting polls was the Brexit referendum in 2016, which was supposed to be won by the Stay group. The result in that referendum stunned the markets and most of mainstream media.

Could anything of this magnitude happen in today’s election? It remains very unlikely, the average British voter is set along red or blue lines and voting in the least bad option. However, the Reform party is gaining traction, and has added to its candidates Niel Farage.

Farage was the lead figure in the Brexit campaign, which he eventually managed to win. His candidacy has given the Reform party visibility and renown, something they have had little of since they formed.

Reform Party’s First Seats

The reform party may win its first seats in the house of parliament. But it may also make things worse for the Tory party. Many analysts believe the Reform party votes will come from the Conservative vote.

However, I’m not so sure, many British citizens share the same concerns whether they are on the left or right. Concerns which establishment parties like Labour and the Tories do not wish to even address.

If they do address them, such as immigration, what he have seen is the Conservative party promise to reduce illegal immigration, yet it has risen for every year they have been in government.

The surprise might come from the percentage of votes going to the Reform party. Most polls place them at receiving between 15% and 17%. Should that be a much larger number, although it may not win the more seats, it would show that the two-party system is beginning to fall.

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Gino Bruno D'Alessio
Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.
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