Markets could initially be rocked if Johnson loses, given the instability and moves to replace him that would follow. But some analysts think it could ultimately be a positive development for the UK investments, as it would pave the way for someone with a bolder vision to take the reins as economic activity stagnates.
The world’s fifth-largest economy shut down in February and started to contract in March. The pound has plunged nearly 8% against the US dollar this year, losing even more than the euro.
“It really opens up the possibility of change,” said Jordan Rochester, currency analyst at Nomura, which specializes in the UK market. The current government, he added, “has no agenda other than ‘keeping Boris Johnson in power'”.
Britain’s bad luck
Rising food and fuel prices have created the worst cost of living crisis in decades, forcing low-income households to choose between “heating and eating” which has become a rallying cry as activists are demanding more support from the government.
His style of governance has also animated criticism as the country’s economy stumbles.
“You’re just looking to campaign, keep changing the subject and create political and cultural divides primarily to your advantage, at a time when the economy is struggling, inflation is soaring and growth is at its best. anemic,” said Tory MP Jesse. Norman – a former Treasury minister – said in a letter on Monday explaining why Johnson had lost support.
A new prime minister?
The possibility of a new leader at 10 Downing Street is buzzing among investors as it could give the government a new direction.
His victory sent the pound to $1.34. While battered by the pandemic, a strong rally in 2021 pushed it above $1.40 a year ago.
A new prime minister could unveil a big spending package to win support, usher in more sweeping reforms and reduce tension with the European Union over trade, Rochester said. This would be useful for the pound sterling.
“While uncertainty over who might lead the country could temporarily hurt market sentiment, the economy and markets would likely benefit if the UK were no longer led by an unpredictable populist,” Kallum said. Pickering, senior economist at Berenberg Bank, in a note to clients on Monday.
If Johnson wins, meanwhile, Britain can expect the same, according to Pickering.
“Johnson would continue to preside over a predominantly centrist, low-power agenda,” he said.