A New Dawn

James Penn
January 15, 2020

The UK political situation certainly looks very different in 2020, relative to 2019 and the previous two and a half years.

Since my last article, we have of course had the results of the UK general election, resulting in a resounding victory for the Tories.

The political disagreement, the acrimony and the squabbling, which were such a feature of the former three years, seem to have suddenly vanished.

The Withdrawal Agreement Bill passed through the House of Commons at its third reading on Thursday last week with barely a murmur.

The Committee Stage, which was such a source of controversy last October that it effectively precipitated the general election (remember the government wanted to accelerate the Bill’s passage with just three days for debate through a ‘timetable motion’), passed through the Commons in roughly the original anticipated time period – three days.

The background of political debate, which has informed virtually every waking minute of our time in recent memory, is now virtually silent. The silence is almost eerie.

The scale of Boris Johnson’s ‘People versus Parliament’ victory was simply a political earthquake. No wonder the political classes in London are still seemingly shell-shocked.

In December, the historian Anthony Seldon suggested on Radio 4’s Today programme that the result stood alongside four other massive UK general elections in British history.

According to him, these were 1874, when Disraeli led the Conservatives to an unexpected landslide, 1906, when the Liberals won their last major landslide, 1945, when the Labour Party finally won an outright majority after the Second World War, and 1979, when Maggie Thatcher won the victory which led to the changes in unionisation and the structure of the economy we are familiar with from the 80s and 90s.

It was interesting that Seldon didn’t include the 1997 Labour landslide, when Labour won 400 seats and a 160 majority, presumably on the basis that it didn’t lead to a lasting change in the social make-up of the country, or to a subsequent political realignment.

Again listening to Radio 4 in the wake of the election result, it was interesting to hear many former Remainers shifting their position, accepting defeat, and moving on.

Michael Heseltine, the former Cabinet minister, effectively said, ‘We lost and we need to move on,’ and suggested that EU membership was not now a subject for debate for at least a generation.

The Financial Times has also caved on its markedly anti-Brexit position, and has moved towards the concept of a negotiated Free Trade Agreement, perhaps delayed into next year if considered necessary.

The Scottish Nationalists tried desperately to raise IndieRef2 onto the agenda late last year, but it didn’t seem to be with much conviction.

All the above confirms that the Tory victory was so devastating that it has killed off debate on a number of issues and completely reshaped the political landscape.

From the Tories’ perspective it was the perfect result, and sets them up not just for the next five years, but perhaps for the decade. If they play their cards right, they could be in power for another 20 years.

Credit surely has to be given to Boris Johnson for this. It is impossible to imagine Jeremy Hunt, the other candidate for the leadership last July, or even Michael Gove, carrying this off. ‘Workington Man’ brandishing ‘We Love Boris’ placards could only have been achieved by one person.

After all the uncertainty, the picture looks better for the UK economy and UK assets.

UK equities have outperformed on a constant currency basis since September but we would suggest that they have scope to do so further.

Sir John Templeton said that investors should aim to buy stocks at the point of maximum despair. That was surely in early October, when it looked as if the UK could be locked in political and economic deadlock indefinitely into the future.

Business confidence is returning, and we would anticipate that the UK will be able to finalise its exit from the European Union smoothly, with the dangers of a second ‘cliff edge’ at the end of this year relatively low. There is also the chance of some fiscal easing.

A final word must go to the LibDem’s disastrous strategy to support an early election. Back in October Boris was on the ropes, unable to pass legislation and prevented from calling an election by the Fixed Term Parliament Act. The Remainers had him in a vice.

For some reason the LibDems decided to go with the Scot Nats in agreeing an early election, presumably in the delusional belief that they would become the main party of opposition in place of Labour, or even win outright.

Delusions of electoral victory have been a LibDem feature over the years – I recall David Steel telling members to ‘go back to your constituencies and prepare for Government’ back in 1981.

Instead, last month the LibDems managed to lose half their seats,  their leader and the chance of a Second Referendum.

LibDems: go back to your constituencies and prepare a light vegetarian meal.

Disclaimer: The views thoughts and opinions expressed within this article are those of the author, and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security.

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