Snap general election could benefit UK mid-caps

UK Prime Minister, Theresa May, has called for a snap general election on 8 June 2017.

If Theresa May’s Conservative Party (the Tories) can increase their majority in the snap general election called for 8 June, this should be bullish for UK equity markets and consumer confidence. The UK government would be in a stronger position to negotiate the terms of Brexit and May’s government would be given a definitive mandate for Brexit, although one could question the real benefit of a greater majority of a fractured party.

Both the timing and rationale for calling this election are sensible and politically astute. The Tories currently face a weak opposition and the irrevocable nature of Article 50 provides them with an electorate highly incentivised to get a good deal (or any deal) with the European Union. At present the Conservative government look best placed to do this.

We do not see this election as a stumbling block for short-term consumer confidence on the basis that the election is in just over seven weeks. At the time of writing shortly after the announcement sterling has strengthened marginally on the news. Overall, we believe this news is more positive for the domestic mid-caps than the international large-caps because of a likely further strengthening of sterling and a more stable medium-term political environment in the UK.

Neil Hermon, Indriatti van Hien – UK equities managers – Henderson