UK voters deliver another election surprise

A ‘softer’ Brexit looks more likely as the Conservative Party loses power

Arnab DasConnery_Sean_se_150dpi_RGB

One year after the Brexit referendum and two years after the Scottish independence referendum, UK voters have surprised the country and the markets once again, with a dramatically different election outcome than suggested by almost every poll: Instead of an enlarged Conservative Party majority, which Prime Minister (PM) Theresa May wanted to see, the result of the June 8 general election is a “hung parliament” — no party controls a majority.

Thus, the election implies uncertainty and profound challenges for governing the UK in general and negotiating Brexit with the European Union (EU) in particular — and by extension for UK macro and market performance. That said, Invesco Fixed Income believes this latest political shock is more of an idiosyncratic story for the sterling currency and UK government bonds (gilts) than the sudden, but ultimately transitory, global financial shock triggered by the Brexit referendum a year ago.

Over the longer term, however, we believe the UK


The UK triggers Brexit with Article 50. So what happens now?

With key European elections ahead, post-Brexit relationships remain unclear

Arnab DasConnery_Sean_se_150dpi_RGBThe Brexit process started today, when British Prime Minister Theresa May formally notified the European Union (EU) of the UK’s intention to withdraw from the EU under Article 50 of the Lisbon Treaty.

The invocation of Article 50 kicks off a scheduled two years of formal talks with the European Commission, the EU’s executive branch, on the terms of the UK’s exit. Talks will likely lead to a new UK-EU relationship or — in the event of a failure to strike a new deal in time — to the UK “crashing out” of the EU, with the potential for serious economic disruption to trade, investment and general relations.

The nine months since the June 2016 referendum on EU membership has been full of preliminaries, doubts, soul-searching and posturing on both sides of the English Channel. At Invesco Fixed Income, we expect a good deal of posturing to continue as actual negotiations get underway.

Key elections will shape the future of the UK-EU relationship