Five UK Election Scenarios: Is Labour Set for a ‘Supermajority’?

(Bloomberg) -- UK opinion polls have been remarkably consistent over the six-week general election campaign: The opposition Labour Party is projected to win, and leader Keir Starmer will be Britain’s new prime minister.

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Where polls differ is on the scale of victory, and whether Rishi Sunak’s Conservatives face an existential threat after 14 years in power. Below are possible scenarios — including some wildcards — that could unfold on Thursday night. Bookmakers’ odds show the perceived likelihood of each outcome.

1. Labour ‘supermajority’ (250-seat majority)

A Labour landslide is arguably the base case, due to the huge poll lead the party has held for months, a result that was barely conceivable after Jeremy Corbyn led it to an historic defeat five years ago.

Recent “MRP polls” — large nationwide surveys that project the result on a district-by-district basis — put the Labour majority in a range of between 162 and 382 seats. Those numbers have given rise to a new phrase in British politics, the “supermajority,” which the Tories are using to warn against what they argue would be Labour’s unchecked power.

While controlling two-thirds of the House of Commons’s 650 seats doesn’t unlock special powers, one party wielding so many votes would be a political earthquake with the potential for many aftershocks. At the upper end of the range, the survival of the 300-year-old Conservative Party would be at risk.

Starmer would face less external opposition, but could come under internal pressure to be more ambitious and progressive, perhaps with more tax increases and public spending. Although Bloomberg Economics reckons that could be a boon for the economy, it might make wealthy Britons nervous.

Still, the Tories have spent so much airtime warning about a Labour supermajority that such a result is unlikely to surprise investors. And traders may see a mandate for closer ties with the European Union as potentially dismantling a so-called Brexit premium that’s kept UK assets trading lower since the 2016 referendum.

  • Odds: Gamblers on the Betfair Exchange see Labour winning between 450 and 499 seats — enough for a supermajority — as the most likely outcome at 6/5 odds. On its Sportsbook platform, the odds are at 11/10.

2. Blair-like landslide — (150-seat majority)

Even Labour victories toward the lower end of the MRP forecasts would be huge for a party that’s governed for less than a third of the past century. The party’s best result was Tony Blair’s 179-seat majority in 1997, which kicked off 13 years in power.

Such a win — almost double Boris Johnson’s 80-seat Tory majority in 2019 — would still give Starmer a lot of freedom to pass legislation. And he would likely face less pressure from the left seeking to influence his policy program. Still, the Conservatives would probably be relieved, having avoided the extinction-level event some had feared.

Sunak’s critics had warned that the Tories risked a repeat the 1993 wipeout of Canada’s Progressive Conservatives — the worst-ever result by a governing party in the Western world. Even a lesser defeat would likely end Sunak’s tenure as leader. The remaining MPs would quickly become consumed in a battle between the right and the center-right over the party’s future.

  • Odds: Gamblers on Betfair give 11/5 odds on Labour winning between 400 and 449 seats, the second-most likely outcome. That’s also the case on its Sportsbook. Meanwhile, Business Secretary Kemi Badenoch is the favorite to lead the Conservative Party in opposition at 7/2 odds.

3. Narrow Labour win (50-seat majority)

Before the chaos of Johnson’s pandemic tenure and Liz Truss’s subsequent 49-day premiership in 2022, many Labour supporters would be overjoyed with even a slim majority of, say, 50 seats. Only postwar leader Clement Attlee has overturned a bigger parliamentary deficit than the one Starmer inherited.

Yet expectations are so high, such a result would represent a major surprise — and could undermine Starmer early in his premiership. Much of the post-vote analysis would center on how the Tories staved off total disaster, and the new opposition would likely spin it as a lack of enthusiasm for Labour.

That would heap scrutiny on internal Labour politics and fuel criticism of Starmer for being too cautious. With surveys showing voters wanted public services to be rebuilt, Labour’s election manifesto instead emphasized fiscal responsibility to ward off Tory attacks.

In this scenario, Starmer’s parliamentary party would wield more sway, potentially threatening rebellions if he continues to advocate restraint on spending. The result could be a less stable government, and undercut fund managers’ hopes for a period of political calm after years of turbulence in pound and gilt markets.

  • Odds: Betfair is offering 5/1 on Labour winning 350-399 seats, translating to a more limited majority.

4. Hung Parliament (no overall majority)

Although Sunak allies were warning of the risk of a hung Parliament as recently as May, such a result would now be considered a huge shock. If Labour needed to cut a deal with a third party to govern, it would likely rattle markets, spark political turmoil and renew debates over the accuracy of British polling.

Starmer would be left have a choice of trying to form a minority government or entering into a coalition. The most likely partner would be Ed Davey’s center-left Liberal Democrats, since Starmer has ruled out a deal with the pro-independence Scottish National Party. The MRP surveys project a range of 38 to 71 seats for the Liberal Democrats.

The question then would be what Davey might try to extract for his cooperation, with reducing the effects of Brexit, securing more money for the National Health Service or moving from Britain’s first-past-the-post electoral system likely high on the agenda. If Starmer balks, a second general election could soon follow.

Investors may look to add an uncertainty premium to UK assets until there’s more clarity on the policies and stability of the incoming government.

  • Odds: Betfair offers 20/1 on its Sportsbook, and the odds have widened to 28/1 on the exchange. Sportsbook odds on Labour forming a minority government are 100/1, a Labour/Liberal Democrat coalition is 66/1 and a Conservative minority government is 200/1.

Wildcard: Lib Dems become main opposition

Either the Conservatives or the Labour Party have been the official opposition in Britain since the end of the First World War. There’s a outside chance that that could change, with the Liberal Democrats coming in second.

That would make Davey the UK’s opposition leader, and send shock waves through Westminster. For Starmer, it would change the nature of the weekly Prime Minister’s Questions — although the Liberal Democrats and Labour traditionally share common ground on trying to boost public services.

Such a shake-up would require the Liberal Democrats to make huge in-roads into the Tory heartlands of southern England. Chancellor of the Exchequer Jeremy Hunt would likely be among the big names to be out of a job.

There is another likely corollary in this scenario. Polling by Find Out Now for Electoral Calculus last week put the Liberal Democrats on 71 seats, and Nigel Farage’s populist Reform UK on 18 seats — a clear wipeout scenario for the Conservatives. While Starmer would look forward to exchanges with Davey, a Farage backbench of more than a dozen MPs could signal a more polarized future for Britain.

  • Odds: Betfair offers 12/1 on the Liberal Democrats party getting more seats than the Tories.

--With assistance from Greg Ritchie.

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