The Brexelection: What to expect?

Highlights:

• The UK general election will take place on Dec. 12. Latest polls see the Conservative Party ahead of Labour. However, given the various difficulties in forecasting, the election result is still not a foregone conclusion.
• A Tory majority would likely pass the Johnson Brexit deal before Christmas, enabling the UK to leave the EU by end of January. Markets would likely respond with initial relief upon the UK parliament to finally return to a clear majority. However, PM Johnson excluded lengthening the transition period which could result in a cliff-edge by end-2020.
• The election may also lead to another hung parliament or a form of Labour minority government. Then, a second referendum will likely be needed to finally settle the Brexit question.
• Given the party manifestos, the election will also have important implications for economic policy. A Conservative win is unlikely to result in much additional spending beyond the September fiscal review announcements. By contrast, Labour plans are rather “radical”, but as a majority is virtually impossible, they will not be executed without major modifications.

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