Britain is heading for a big blue victory in its upcoming snap elections, according to projections from Citi.
The US investment bank is penciling in a Conservative majority of over 100 seats as its base case on June 8 – a scenario which it thinks lowers the risk of a “chaotic Brexit”. But it warns a Tory triumph is not likely to raise the chances of the UK staying in the single market.
Christian Schulz, economist at Citi, said:
A larger majority for Theresa May would make her version of Brexit – ‘hard-but-smooth’ – less prone to political ‘accidents’ in the UK and would give her more time to convince voters of the benefits of compromises before the next election in 2022.
Current polling from Ipsos Mori suggests the Tory party would win 49 per cent of the vote share, ahead of Labour’s 34 per cent and the Liberal Democrats on just 8 per cent (see chart below).
Citi stress this “hard but smooth Brexit” is currently being priced into UK assets, pushing sterling to around $1.30 against the dollar. Still, the pound could head to as high as $1.34 should Ms May’s victory materialise in three weeks’ time, said the bank. The stock and gilts markets should be broadly unchanged, it adds.
According to the Citi’s calculations, the Conservatives are on course to bolster their majority from the current 17 seats to anywhere in the region of 104-190 seats.
A stronger majority and vision of a longer Brexit exit should keep the country’s economic dip around 2019 “small” adds Mr Schulz.