Will the Run-Up to the UK Snap Election Affect Trade or Ongoing Brexit Negotiations?

April 27, 2017

Brexit has been one of the hottest topics in financial and political terms over the past year, and the series of events kicked off by the announcement of the UK referendum has seen a rollercoaster of volatility for the British pound sterling and UK share indices. For those who are interested in the markets, such as the many day traders using platforms like ETX Capital, the Brexit saga has so far presented a lot of opportunities, and it seems the ‘interesting times’ are far from over.

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The Snap Election

The latest development is, of course, Theresa May calling a surprise general election, which will be held in the UK on June the 8th. This came as a shock to many, including political and financial analysts, as no election was required under UK law until 2020, and May herself had said on several occasions that she was not planning for an early election. This election is being heralded by many British people as an election unlike any other, and one which may be the most important in their lifetimes, due to the high stakes of Brexit itself.

Polls indicate that the election is likely to be won by May and the incumbent Conservative Party, and is seen by some as an attempt by the Prime Minister to gain from the perceived weakness of opposition party leader Jeremy Corbyn. Of course, however one feels about the election, it does seem like having one during the already complicated post-Article 50 period adds a lot of extra uncertainty to things around Brexit. However, financial experts such as Gregor Irwin, who is chief economist at the Global Counsel advisory group, believe the election will not, in fact, have serious implications for trade.

Trade Policy ‘A Marginal Issue’

Gregor Irwin was reported as saying: “There are unlikely to be any implications for trade. While Brexit is a central issue, trade policy will be a more marginal issue, although there may be some questions about environmental and other standards in future trade agreements.”

He went on to add: “The market reaction on Tuesday – which produced a small but significant increase in the value of sterling – gives you an idea of what investors think.”

While investors tend to become more bearish at the first sign of added uncertainty, the forex market reaction to the election does, as Irwin points out, show that despite the surprise nature of the election, it is something that those concerned with trade are comfortable with.

Negotiations to Continue

The election is also unlikely to stall the early stages of negotiations following the triggering of Article 50 late last month. The European Council has already stated that the election will not impact its ability to complete its mandate for negotiating at the 29th April summit on Brexit. Negotiations with other countries around trade which could have an impact on a huge range of commodity prices will still be a matter for whoever is prime minister when the Brexit process completes in 2019.

While the election is certainly gaining a lot of attention and is definitely an important event in global terms, it seems that this frenetic run up period is unlikely to disrupt the planned work towards defining Brexit, or affect trade.

This should come as reassuring news to those involved in businesses that are very sensitive to uncertainty around trade, and also to investors watching the UK economy. Of course, whether things are disrupted by the outcome of the election depends very much on whether or not the result is as surprising as the early election itself.