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Election result is a ‘surprise’

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Neil Woodford, head of investment, Woodford Investment Management, comments on the ’surprise’ outcome of the UK General Election…

For all the talk of hung parliaments, horse trading and coalitions, the result of this year’s General Election will come as a surprise to many, including us. The polls have consistently depicted a close result and, for a variety of reasons it has been very difficult to predict the outcome. Very few commentators – probably none – had expected such a strong performance from the Conservative’s on election night.

Although the last few seats are still to be confirmed, the result of the election looks much better than expected – that isn’t a politically inspired statement but one that is based on the fact that such a decisive result removes the risk of the prolonged period of political uncertainty that we had expected to prevail. That is reflected in the surge in the pound that greeted the BBC exit poll which provided the first indication of such a strong conservative showing and the positive opening for UK equity markets this morning.

Nevertheless, it certainly doesn’t remove all of the political uncertainty. The performance of the Scottish Nationalist Party gives them a significant voice in parliament but no power. Question marks remain, therefore, about the viability of our constitution and the Union. Meanwhile, the result will herald a referendum on Britain’s membership of the European Union in 2017. The result will inevitably also call into question again, the fairness of a political system which can deliver an outcome in which the number of seats in Westminster does not correlate with a party’s share of the national vote.
And indeed, as we highlighted yesterday, the UK economic outlook looks somewhat subdued over the next five years, regardless of the result. A less conclusive result would clearly have been worse for the economy because of the associated political uncertainty, but our assessment of the UK economy suggests we should expect modest growth at best over the next few years. Clearly, these are early thoughts on the election outcome and we look forward to sharing our more considered views over the coming weeks.

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