Due to tremendous miscalculations made by Teresa May‘s conservative party on the issue of pensions and an increasingly impressive campaign by Labour’s Jeremy Corbin, the polls are narrowing in the run up to the June 8th General Election in the United Kingdom. As of last week, the latest polls showed Labour only 6-7% behind the Tories and every poll seems to show them getting closer and closer.
From a geo-political viewpoint, what is significant about the vote is that without the strong showing that Mrs. May was expecting when she called the snap election, it may be very difficult for her government (if she does end up winning) to effectively negotiate the UK’s exit from the European Union on its own terms. A weakened Tory government may find itself forced to soften its positions and even call for a new referendum once the details of the exit are more clear.
An unexpected Scenario
There is, however, a scenario where Labour might win the election or perhaps, be in a position to form a broad coalition to replace Mrs May. All of this has much to do with the myriad details of politics in different parts of the United Kingdom including Scotland and Northern Ireland. While I am not an expert, it seems that the Scottish National Party (SNP) and Sinn Fein may end up holding the keys to a labour government and that could unwind Brexit and send Europe on a very different path in the years to come.
According to the Guardian, the SNP is likely not to dominate the vote as it did back in 2015 when it won 56 out of the 59 seats from Scotland. The thing is if Labour continues to rise in the polls and the SNP manage to win 40-50 seats, then it might hold the balance. It will likely then request another referendum in support of a new labour government.
An even more interesting scenario would develop if Labour, the Liberal Democrats, Plaid Cymru (Welsh nationalists), and the Scots fell just short of a majority in Westminster. If that were to happen then Sinn Fein’s Norther Irish seats might come into play. The good news (from a european perspective) is that Sinn fein might win as many as 7 seats and become Northern Ireland’s largest party in Westminster. The bad news is that the Republicans have historically ran for office and then refused to take their seats arguing that Northern Ireland should be part of the Irish Republic. The thing is that if those 7 seats were the key to turning out the Tories and potentially scrapping the whole idea of Brexit, a key issue for Sinn Fein, then the Party might actually reconsider its boycott……
What to do?
For me the continued uncertainty concerning of Brexit is an excellent example of how important it is for firms not to focus on business as usual and to continually look at the broader assumptions upon which its strategy is based. With regards to Brexit, Prof. Nuria Mas, the head of the Economics Department at IESE Business School, talks about three scenarios and my advice is for business to be ready for all of them as well as my favorite in which the General Election, a new referendum or some really artful political negotiations and some needed reform keeps the U.K. in the European Union.
Another scenario is what is normally referred to as a “hard exit” in which the U.K. would end up with a relationship with Europe like any other non member country as per the rules of the World Trade Organization. In the U.K. this is now being called a “clean exit” as, according to Nuria, that sounds better. Most analysts concur that this will be a disaster for business.
It seems very unlikely that the other European countries would allow the UK to walk away with little or no negative impact. According to the data, the U.K. relies much more on Europe than the other way around and neither Germany or France will want to make it easy for Mrs. May. The problem is that even if there was a will to do so, it usually takes years to negotiate complicated trade agreements and the clock is already ticking.
I, for one, am hoping for an upset by the Labour Party.