Europe Watch - July 2017

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So much for predictable politics. In recent years the UK electorate sure has had a tendency of delivering surprises at the ballot box. In 2010 the first coalition government since the 1970s was unexpectedly chosen, in 2015 the pollsters and betting markets didn’t anticipate an outright Conservative win and we all know what happened last year. So it shouldn’t be terribly surprising that in the recent snap general election the Prime Minister’s Conservative Party lost its Parliamentary majority, giving way to a Hung Parliament and subsequently a confidence-and-supply agreement with the Democratic Unionist Party (DUP) of Northern Ireland. While this outcome complicates the outlook, we feel that the impact on the real economy is unlikely to have a pronounced negative effect. After all, we are at full employment, corporate profits are healthy and global growth is picking up. Furthermore, we take some comfort in the fact that historically elections in the UK have tended not to significantly impact economic performance in the year of a vote. While uncertainly remains elevated for the broader market, it has arguably decreased in Scotland. The loss of seats by the Scottish National Party should assuage concerns of a second independence referendum in Scotland for the foreseeable future. Given the role that Northern Ireland and Scotland played in the recent election, these countries are an emphasis in this month’s Europe Watch.

Source : CBRE Global Investors

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