Surprise result implies weaker government
There was a big shock from the result of the latest general election in the UK.
A hung parliament means we are going to have a much weaker government in power going forward. It will be much more difficult to pass legislation and change budgetary rules, etc.
This means households and corporates may decide to hold back a little on spending and be a little bit more cautious due to that uncertainty.
Sterling dip is inflationary
Now, the immediate impact that we’ve seen for the pound is not as significant as that of the Brexit referendum but it is still there.
At the margin, we’re going to see a little bit more inflation and probably slightly weaker growth going into the next year.
The Bank of England is unlikely to change policy at this stage but I’m sure they’re willing to step in if financial conditions worsen.
Brexit is the main uncertainty
The big question is really about Brexit; will Europe still be reasonable with the UK given the much weaker position the UK is now in?
It’s impossible to say at this stage but we will keep monitoring it and, of course, keep you up to date.