City of London analysts are warning clients to prepare for a UK election this year as May's Brexit deal collapses

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  • City of London advisors have raised the chances of the UK holding a general election in 2019.
  • Analysis from Newgate Communications has raised the likelihood of a general election to between 50% and 65% as Prime Minister Theresa May’s Brexit deal looks set to be rejected by parliament.
  • This could trigger a vote of no-confidence in the government, in turn forcing a general election.
  • The House of Commons will vote on May’s deal on Tuesday night.

The United Kingdom is likely to have a general election this year amid uncertainty over Theresa May’s Brexit deal, according to advice being given to firms in the City of London.

If May’s Withdrawal Agreement is voted down in the House of Commons on Tuesday then it is expected that the opposition Labour Party will trigger a vote of no-confidence in the the prime minister’s government.

This raises the chances of a 2019 general election, according to Newgate Communications, an advisory firm for the City of London.

They put the odds of a general election this year at somewhere between 50% and 65%, and have been advising financial firms to prepare for an election and possible change of government.

Sources say there has been growing interest in the City of London about what a UK government headed by Labour leader Jeremy Corbyn would mean for the financial sector.

MPs are almost certain to vote down May’s deal on Tuesday despite late attempts by the prime minister to convince them to do otherwise. The prime minister could lose by a margin of over 100 votes, according to some estimates.

There have been suggestions that May could request an extension to the Article 50 exit process, meaning Brexit would be delayed beyond the scheduled exit date of March 29.

The pound is up 0.2% against the euro as of 12.35 p.m in London (7.35 a.m EST).

“Despite the possibility of a ratified deal prior to the March deadline, FX markets are poised for another bout of volatility due to Brexit uncertainty as the cost of short-term protection against weakness in the pound etches back up to December’s high,” Simon Harvey, FX analyst at Monex Europe said.

“Should May suffer defeat in tomorrow’s vote, it is our belief that further delays in the Brexit process will occur.”

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