Investment Institute
Macroeconomics

UK General Election: Ushering in a new era

  • 05 July 2024 (10 min read)
KEY POINTS
Keir Starmer is the new UK Prime Minister (PM) and at the time of writing is on track to form the new Parliament with a majority of around 170 (seven seats are still to declare currently). That is far larger than the Conservatives’ majority of 80 in 2019, though the story is largely one of Conservative weakness, rather than Labour strength
The coming weeks will be busy, with a NATO meeting next week and the King’s Speech the week after. We doubt there will be anything new delivered; instead, the new PM will likely push ahead with legislation towards achieving his five key “missions”. The Autumn Budget – likely to be held in early October – will be the first event showing the new government’s priorities
This will be where reality hits; the Institute for Fiscal Studies has highlighted numerous times during the election campaign the strained nature of the public finances. We think additional fiscal tightening will be needed over the next five years

The polls were right; Keir Starmer will step into 10 Downing Street later today as the UK’s new Prime Minister (PM) after 14 years of Conservative (Tory) government. The exit poll predicted Labour would win 410 seats – slightly less than former PM Tony Blair’s 419 in 1997 – and at the time of writing, Labour looks set to win 413 (with seven seats still to go). If that bears out, Labour will lead with a majority of around 170, far larger than the Tories’ 80 in 2019. A prominent boon to the Labour Party was the revival of support in Scotland; the party picked up 36 seats, following the collapse of the Scottish National Party (SNP), which won just nine, down 38, but more importantly the split of the right vote.

The Conservatives, by contrast, faced a washout with a staggering 19% drop in vote share from the last election. At the time of writing this looks to translate to a win of just 122 seats, 243 less than in 2019, which would result in a larger swing than in 1906 when Arthur Balfour’s government lost 211. Key Tory losses included a favourite for future party leader Penny Mordaunt, Jacob Rees-Mogg, former PM Liz Truss, Liam Fox, and Grant Shapps. The party’s performance was not quite as poor as some had expected – The Economist, for instance, had predicted that the party would win just 76 seats and the lowest MRP opinion poll 56. But there are no two ways about it, this was a bad day for the Tories and means Rishi Sunak will most likely step down as the leader of the Conservative Party, sparking another Tory leadership race – Kemi Badenoch and James Cleverly are among the current favourites to succeed him.

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Pushing the Walls
Macroeconomics

Pushing the Walls

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