Macro insights

UK faces Brexit-fuelled General Election – what happens next?

Key points

  • The General Election on 12 December will set the course for the UK’s exit – or not – from the European Union and the next phase of Brexit.
  • The Tories enjoy a clear lead in the polls, suggesting an outright majority. But the complex dynamics of political pluralism in the UK’s first-past-the-post system casts doubt on this apparent clarity.
  • A small Tory majority appears the most likely outcome and should allow the government to pass its deal to achieve Brexit on 31 January.
  • We forecast that this outcome could deliver GDP growth of 1.2% in 2020 and 1.0% 2021, reflecting expectations of a renewed global deceleration in 2021. We see the Bank of England leaving rates on hold in 2020 but expect gilt yields and sterling to rise.
  • Given low conviction surrounding any election outcome, we look at a number of alternative economic scenarios. Most see uncertainty remaining elevated, but this is likely to be significantly offset by material fiscal easing.

Talk about a resolution

The outcome of the 12 December UK General Election could allow the UK to finally settle the issue of leaving the European Union (EU). This could be by passing the current negotiated Tory deal, choosing another deal under a Labour-led government or revoking Article 50 altogether. Each outcome would provide a meaningful change to the UK’s current economic outlook that is currently blighted by ongoing Brexit uncertainty.

We believe that a small Tory majority, capable of passing its Brexit deal in January, is the most likely outcome. However, as we explain below, divergent political dynamics leave us with low conviction for this outlook. As such, we provide a broader range of economic assessments for different electoral scenarios.

Our central forecast would deliver GDP growth of 1.2% in 2020, a touch lower than our 1.3% expectation for 2019. However, most other alternatives include longer periods of uncertainty, adding headwinds to economic outcomes in 2020. Our central forecast would provide a window of opportunity for the Bank of England (BoE) to tighten policy in Q3 2020, but on balance we expect policy to remain on hold, with the prospect of rate cuts the following year depending on the global outlook and decisions around a Brexit transition extension.

Don’t bank on a Tory lead in the polls

The Conservatives go into this election campaign with a clear lead in the polls. The latest poll, published by YouGov on 12 November, estimated the Conservatives to have a 14-point lead over Labour – the party enjoyed an average lead of 10-points across all polls in October. Exhibit 1 shows different pollsters’ estimates of the margins required for various electoral outcomes.
Prime Minister Boris Johnson also consistently enjoys a higher leader approval rating – often seen as a key election indicator – than Labour leader Jeremy Corbyn, averaging 20 points (pts) across all pollsters since he took office in July. Corbyn broadly holds second place – although this has been close, with Liberal Democrat leader Jo Swinson placed second by some polls in September.

Exhibit 2 shows the broader polling across 2019, showing numerous key trends. It highlights the decline in support for the Conservative and Labour parties from the start of 2019 to mid-year. This fall coincided with a rise in the polls for the Brexit Party (BP) and Liberal Democrats (Lib Dems) as frustration with the Brexit process rose. Support appeared to shift towards the less compromising positions advocated by these two parties.

The polls also show a clear boost in Conservative Party fortunes since Johnson replaced Theresa May as Prime Minister in July. This rise coincided with a marked shift in Tory policy towards a less compromising, harder Brexit and has also seen an associated reverse in fortunes for the BP. The Tories have enjoyed a further, more recent lift since they agreed a new deal with the EU. At the same time there has been a dip in Lib Dem support, which might have resulted from returning moderate Tories who had disagreed with the government’s no-deal approach.

Exhibit 2 also shows that this is not just a choice between the two traditional parties. While below mid-year peaks, the BP still accounted for an average of 12% and the Lib Dems polled an average of 18% in October. An election actively contested across four parties in many constituencies significantly complicates any assessment of national polls in the UK’s first-past-the-post voting system. It suggests that a simple comparison of Conservative and Labour positions may oversimplify a complex and dynamic electoral backdrop, where traditional left and right politics are overlaid by remain/leave tendencies that have crossed traditional party boundaries.

Just as importantly, any assessment of current polling must acknowledge that it takes place only at the start of the electioneering. Election campaigns generate their own dynamic. Polling in 2017 saw a Tory lead of 21 points at the start of the campaign shrink back to 2-3 points by voting day.
It is premature to pre-judge the outcome of these elections, based on where polling currently stands. Changes in polls –and subsequent momentum – will be an important signal as we move towards 12 December.

We will also monitor the number of undecided votes. At present, the number of 2017 Tory voters that currently “don’t know” how they would vote in this election has started to rise again, having fallen back to 23% from 33% before Johnson became Prime Minister. By comparison, Labour voters that currently “don’t know”, has started to fall having remained around one-third since mid-year. This suggests a significant number of floating voters that could swing the outcome. However, the fact that “don’t knows” are similar for Brexit ‘remainers’ and ‘leavers’ at around 35% illustrates that it is not obvious which way these undecideds will eventually fall.


Overlapping constituency complexities

The interaction of four political parties - with strong and possibly dominant cross-party election goals - makes the assessment of this election more complex than a simple analysis of the swing in political sentiment from left to right. Moreover, with Prime Minister Johnson starting this election with a Parliamentary deficit – a working minority of 22 – and no natural coalition partners, the Conservatives have work to do to achieve an outright majority, which is the only way they can maintain control in Parliament. In addition, the Tory strategy appears to be to sacrifice remain-leaning seats, including in the South, to gain more Brexit-focused ones, particularly in the Midlands and North.

The Lib Dems stand to gain several Tory seats given their strong anti-Brexit position. Suffering for their role in the 2010/15 coalition government, the Lib Dems lost a significant number of seats in the 2015 election, going to 8 from 57. They also failed to benefit materially from a clear anti-Brexit message in 2017. A more impactful leader, a clear anti-Brexit message, politically centrist positioning and fading memories of its coalition days should contribute to a revival in Lib Dem fortunes.

However, polling has faded recently. We consider Lib Dem opportunities in constituencies with high 2016 remain votes; where Lib Dems have previously held seats in 2010; and bearing in mind the recent example of overturning a Tory 8k majority. However, beyond an additional 20 or so seats, the Lib Dems soon face vote shortfalls in excess of 12,000. These will be challenging even after the announcement of an electoral pact with Plaid Cymru and the Green Party. We expect a revival of Lib Dem fortunes, but suggest a range of 40-60 seats is most likely. This could cost the Tories a further 20 or so seats. It could also leave the Lib Dems in an influential position to affect future parties or policies in the next Parliament.

Scotland offers a further challenge for the Tories. There the party benefited from a revival in fortunes in 2017 – gaining 12 seats from the 2015 election – helped by Scottish Conservative leader Ruth Davidson. Yet Davidson has subsequently stepped down and Scotland’s Europhile attitude – voting 62% in favour of remain in the 2016 referendum – stands at odds with Johnson’s overtly pro- Brexit stance. Tories thus look set to lose seats in Scotland, although the Scottish National Party (SNP)’s opportunist revival of the Scottish independence theme and 10 years in power may hinder gains. This opens additional opportunity for the Lib Dems, although on balance we see the SNP making further gains.

Yet we see the key issue for this election – and the one that is most difficult to quantify – as the impact that Brexit will have on voting. The BP averaged 11% of the vote across all polls in October, but more recently has slipped to around 6% - far below the 14% that the UK Independence Party (UKIP) reached in 2015. Taken alone, this suggests that BP could struggle to gain any seats, as UKIP did in 2015. Yet the first-past-the-post system could still see it affect the overall outcome, as in August’s Brecon and Radnorshire by-election, which saw the Lib Dems overcome an 8,000 Tory majority in part because of BP participation[1].


Tory anxiety

This fear has long stalked the Tories. The Johnson government has responded to the BP threat by shifting to a more extreme Brexit position – echoing former PM David Cameron’s shift in scheduling the 2016 referendum, in reaction to UKIP. However, with 2017 Labour voter ‘don’t knows’ only recent falling below one-third, the BP could have a material impact on the Labour vote too. Indeed, the Tory’s apparent remain-for-leavers strategy may rely on the BP vote. Many Labour voters in Tory target seats will never vote Tory, but could vote BP, reducing the Labour vote and influencing the outcome.

Beyond the number of BP voters, the most important factor is from which party the votes are taken. YouGov polling suggested 80% of 2015 UKIP voters voted Tory in the 2017 election. Nigel Farage, who led UKIP in 2015, is now leader of the BP – and if these voters returned to support him, it could cost the Tories dearly. A scenario where the BP regained the UKIP votes achieved in 2015 could account for just over 40 seats. If Tory ‘leavers’ have become more comfortable with Johnson than Labour ‘leavers’ with Corbyn – as undecided voter splits suggest – then more BP voters could come from Labour, resulting in net Labour losses. Of course, recent polling already suggested much less impact than this.

However, this week’s announcement from Farage that he would not field candidates in the 317 seats the Tories won in 2017 reduces the likely impact on the Tories. This should reduce the risk of BP displacing Tory seats, but maintain competition in Brexit-leaning Labour seats that could facilitate Tory gains. The scale of this effect is debateable, again if BP achieved UKIP’s 2015 levels, we estimate this could affect around 25 seats (Tory gains from Labour). However, with BP currently polling below UKIP’s 2015 level, the actual impact is likely to be more modest.

We also estimate a Brexit-vote disparity effect. The 2017 election delivered divergence between leave/remain party votes and how constituencies voted in the 2016 referendum. While this illustrated that Brexit was not the only issue in the 2017 election, PM Johnson has endeavoured to make it central to this one, with a recent poll showing that 59% of voters see Brexit as a top three issue for this election[2].

We estimate the potential impact on this vote by rebalancing 2017’s election results with the 2016 referendum votes. Even allowing for a relatively high hurdle, this could still result in net gains of around 20 for the Tories and losses of 26 for Labour. However, even this election will not be purely Brexit focused. Indeed, the Tories risk falling foul of ‘fighting the last war’ with this strategy. Labour’s defence appears to be to offer its own radical economic reform agenda to fulfil the desire for change underpinning 2016’s Brexit vote. This agenda could ward off the Tory challenge for its heartland of Brexit-voting marginals, leaving the Tories short of the necessary gains for a majority.

Finally, we allow for a “Boris effect”. Labour’s relatively small loss in the 2017 election, compared with early polling suggestions, was as much to do with a poor campaign by Theresa May than a good performance by Jeremy Corbyn. Labour cannot count on a repeat of this in the 2019 election. Boris is a proven effective campaigner and Dominic Cummings, Johnson’s adviser, is a key strategist who led the 2016 Leave Campaign. It is difficult to quantify the scale of his effect. However, if Boris is more appealing than May to ‘non-remainers’, then up to 30 seats with small deficits of up to 3,000 could swing towards the Conservatives.

The number of unquantifiable estimates underpinning each of these different political dynamics makes this an unreliable method to estimate the election outcome. However, even allowing for a modest Boris effect, losses in Scotland, losses to the Lib Dems and possible losses by virtue of a BP effect all suggest a much more uphill struggle for the Conservatives than polls suggest. To our minds, this makes the most likely electoral outcome a small Tory majority of 30 seats or fewer. However, we consider this a low conviction call and see the risks tilted towards the Tories not managing to achieve a majority at all.


The economic impact – a scenario approach

Holding a low conviction around our baseline of a small Tory majority, we estimate the economic implications of a range of electoral scenarios. First, we distinguish between the two main outcomes of a Tory or Labour-led parliament. Second, we consider the economic outcomes under variations of these broad outcomes.

Johnson/Cummings strategy success

A Tory majority after December’s election would give PM Johnson more control over Parliament. We believe this will allow him to pass the newly negotiated Withdrawal Agreement Bill (WAB) through Parliament. Beyond the medium-to-long-term impact of a free trade agreement exit, the short-term impact of delivering Brexit and entering an implementation (transition) phase of a status quo ex-ante period, this allows negotiation of the next stage which should support business investment. As Exhibit 3 shows, since the Brexit referendum, UK business investment has underperformed previous cyclical revivals by just over 20%. Anecdotal evidence suggests most of this is the result of increased Brexit uncertainty[3].

Passage of the WAB would allow the UK to leave the EU. However, it would not “get Brexit done”. Rather it would, as Winston Churchill said, be “perhaps, the end of the beginning”[4]. The UK would enter transition while it began the next phase of Brexit – negotiating the replacement free trade agreements (FTA). In principle, business investment should rise as Brexit uncertainty reduces.

However, uncertainty may not diminish significantly. The negotiation of the FTA that will replace the UK’s relations with the EU is likely to take many years[5]. Admittedly, the UK begins the FTA position uniquely aligned to the EU – something that could quicken negotiations. Yet few FTAs have been based on diverging trade standards and tariffs. The Conservatives suggest that this process can be completed by the end of 2020; we find no compelling evidence for this assertion.

The WAB’s transition is designed to keep arrangements stable while such negotiations take place. However, by default, the agreed transition phase ends in December 2020. While it can be extended by up to two years, this needs to be done by 1 July 2020. We believe that once Prime Minister Johnson has achieved a Parliamentary majority, he will be keen to focus on issues beyond Brexit and would extend the transition to avoid disrupting his domestic political agenda.

However, in keeping with the Conservatives “do or die” election posture, designed to minimise immediate BP support, current policy is that the government would not extend the transition arrangement, something that PM Johnson himself has stated. As such, even after passing a Brexit deal, businesses could once again be faced with the risk of an abrupt switch from current EU to World Trade Organization (WTO) trading arrangements at end-2020.

Despite this ongoing uncertainty, and broader risks to the UK outlook posed by current Conservative Brexit policy, the government has announced a number of growth/election- friendly spending giveaways. To be clear, ahead of a full manifesto, the Conservatives have not presented a fully costed economic programme. PM Johnson made significant spending commitments during his leadership campaign. These have been followed by further commitments as he ramped up election preparations on taking office[6].

Moreover, the government has provided no fiscal plans, Chancellor Sajid Javid has not announced a new Budget since taking office. Instead, he has published an unusual one-year spending review, which detailed departmental spending increases of £2bn (0.1% of GDP) for 2019-20 and £13bn for 2020-21 (0.6% of GDP). More recently, Javid has set out a new set of fiscal rules, that would see the government adopt a ‘Golden Rule’ similar to that followed by former Chancellor Gordon Brown. This would see the Conservatives balance the current budget – excluding investment – by the middle of the next Parliament, but cap investment spending to 3% of GDP and debt interest to 6% of GDP. Given other changes, this would allow for further fiscal easing over the medium term.

Labour’s broader business risks

By comparison, Brexit progress under a Labour-led Parliament could be more business friendly. Labour’s policy on Brexit is to schedule a confirmatory referendum within six months of being elected. In the interim it would renegotiate the WAB to include greater worker and environmental protections and working towards a Customs Union style agreement that remained as close to the Single Market as possible. The EU has ruled out further renegotiation of the Bill but this was also the case when PM Johnson took power. With Labour’s proposed changes likely welcomed by the EU, we anticipate a swift renegotiation. Moreover, we would expect a Labour-led government to extend any transition phase until a replacement arrangement was in place.

Labour looks unlikely to achieve an outright majority in any next Parliament. However, with the SNP campaigning for a second EU referendum and the Lib Dems campaigning to revoke Article 50, we believe these parties could support a Labour government’s plans to hold a second referendum.

Business would be presented with an additional six months of uncertainty in the run up to a further referendum. But this uncertainty would be between two options that promised to be much less disruptive to the UK’s current trading arrangements – either a Customs Union or having current arrangements continue. This appears a more favourable environment for the resumption of longer-term investment from domestic and foreign business.

Yet while Labour’s Brexit plans would reduce Brexit-related uncertainty, its broader economic programme create its own significant uncertainties. This Labour leadership makes a virtue of its radical economic agenda for change, hoping to capture the desire to change that motivated the 2016 Brexit vote. Its 2017 election manifesto set out a plan of nationalisation for key UK industries – plans that have extended in the intervening years. It plans an “Inclusive Ownership Fund”, an expropriation of 10% of large companies’ share capital to be redistributed to employees up to a maximum of dividends worth £500-a-year, with the remainder going into government coffers. It has also discussed the introduction of a four-day working week. And its membership has voted for a net carbon neutral economy within a decade.

These radical suggestions accompany a more traditional tax- and-spend programme – albeit more extreme than seen in decades. In 2017 this included an ambition to raise an additional £49bn in taxes, including an increase in corporation tax to 26p from 19p. Labour also plans for a significant spending increase, adding a £150bn spending commitment over five years to the already substantial 2017 plans. This suggests annual additional spending of 2.5% of GDP per annum.

This would be a large boost to demand growth, but in an economy estimated to be close to full capacity, could result in short-term crowding out. This would mean BoE monetary policy tightening and market interest rates and the level of sterling likely to rise, reducing the final impact on GDP growth. Having said that, Labour will also reconsider revising the BoE’s remit, at least to include consideration of environmental and productivity issues, which could reduce its inflation targeting focus.

How many of these policies Labour would be able to introduce is unknown. Recent Conservative governments have found that the Brexit process has dominated the legislative agenda and would likely continue to do so in 2020. Moreover, shared governance in a Labour-led Parliament could see the SNP and/or Lib Dems holding sway over some policies. The Lib Dems particularly could support some of Labour’s tax-and-spend policies but could block the more radical agenda[7].

However, companies operating in the UK would have no certainty over which radical policies might emerge and are extremely wary of the business environment under such a government. This degree of additional policy uncertainty questions the scale of any post-Brexit business investment rebound.


The interim scenarios

Between the polar extremes of an outright Tory majority or a Labour-led Parliament lie a myriad of possibilities.
One of the most likely alternatives is an effective continuation of the status quo – the Tories remain the largest party but struggle to command an outright majority. Then, even the process of forming a government could take much longer, with attempts possible by both Tory and Labour leaders. In the context of a Brexit timeline that now stretches to 31 January, this could prove difficult. Without firmer numbers it is possible that even if a Tory minority government could stand, it would not be able to pass the current WAB in a form that would remain acceptable to the government. January 2020 could quickly slip to the end of the next deadline. What would happen then?

Conceivably, Parliament would contrive to force a further extension from the EU. But with the EU increasingly frustrated with repeated and fruitless extensions to Article 50 there is a rising risk that such an extension be refused, questioning what it would achieve. The EU is unlikely to allow more time for further renegotiation with this government– now ruled out. The EU might accept an extension if Parliament could back a confirmatory referendum of a choice between the Tory-negotiated deal, or revoke Brexit altogether. However, a large part of the Tory party would be fundamentally opposed to such an outcome.

This once again raises the possibility of a no-deal outcome at the end of January, with the UK running out of options and out of time. However, with Parliament currently above all most united in its resistance to a no-deal Brexit, the re-emergence of this risk would more likely force Parliamentarians into a less evil choice – accepting the current deal or a confirmatory referendum.

As well as providing fundamentally different outcomes, alternative scenarios offer different timelines. A Tory deal could move Brexit on from February next year. A Labour outcome could resolve Brexit before next summer. But a hung parliament could see the Brexit process running into the final months of next year – or resolved abruptly at the end of January.


Stabilisation in a slow growth world

Timing as well as outcomes dictate the economic impact. Our central forecast includes UK GDP growth at 1.2% in 2020 and 1.0% in 2021, albeit that such stability in annual rates implies an acceleration of quarterly growth in 2020. However, as discussed, there is a range of possible electoral scenarios, which can each influence the economic outlook. Exhibit 4 illustrates the estimated economic impact over a range of different scenarios. Exhibit 5 provides a more detailed assessment of each scenario.
Each of these scenarios are further dependent on our outlook for global activity. At this stage, we assume a more favourable environment emerging in the first half of 2020, with stabilisation and modest acceleration in global trade. This would prove supportive to the UK growth backdrop in 2020. However, we continue to fret about renewed deceleration to global economic activity, which moves closer to closing the current economic cycle. We see the risks of this mounting in the following year – weighing on the UK outlook.

Uncertainty related market volatility to reduce

Sterling asset markets have been materially affected by the uncertainties of Brexit since the referendum in 2016. Moves in the last month alone have included a 5% rise in sterling against the US dollar and 4.5% against the euro, a 5.7% rise in mid-cap equites8 and a 36 basis-point (bp) rise in 10-year government bonds. This illustrates that Brexit still plays a material role in UK assets[9].

The uncertainty that remains associated with the UK outlook suggests that volatility in sterling assets looks likely to remain elevated. For now, the range of possible outcomes remains broadly the same as it did in August when sterling reached lows of $1.20 to the US dollar. However, we argue that probabilities associated with some of these outcomes has shifted materially, justifying recent market moves.

A central case scenario of the Tories passing a Brexit deal in January providing some offset to weak global growth, through modestly reduced uncertainty and fiscal stimulus, would likely have a number of implications. We consider it reduces the chances of a Bank Rate cut in 2020. We expect the BoE’s focus to return to “modest and gradual” stimulus withdrawal, as stabilising-to-improving global trade, easing financial conditions, a tight labour market and easier fiscal policy result in concerns about domestically generated inflation re-emerging.

Markets are likely to price a rising probability of a rate hike in 2020. However, on balance we now believe this will fail to materialise amidst ongoing Brexit uncertainty surrounding transition extension – and later in 2020, re-emergent global concerns. We no longer forecast a Bank Rate hike in Q4 2020. Admittedly, this decision is likely to remain in the balance and could be affected by the choice of new BoE Governor.

Gilt yields and sterling also look set to rise under this central scenario. Gilt yields look likely to rise as diminished disinflation concerns, domestic and global growth stabilisation, rate speculation and expected increased gilt supply are considered. We would expect gilt yields to rise back towards their start-of-2019 levels.
Sterling also looks set to make further gains on the first stage of Brexit resolution, with a firming policy rate expectation and fiscal stimulus. We forecast sterling rising to around $1.35 to the US dollar by end-2020, and £0.84 to the euro.

However, many different scenarios remain in play. One such could even see the Tories eventually implement a deal, but only after a confirmatory referendum. Here, markets would likely settle to similar levels as in our base case – albeit with much greater volatility over the intervening months until such a referendum. For now, a no-deal exit is also still a possible outcome in January – albeit one we consider much less likely. We think this would result in gilt yields falling below previous lows and sterling falling below $1.20 to the dollar, and around £0.95 to the euro. This scenario could also manifest itself in a similar format if the government ruled out an extension to the implementation period, despite a replacement free trade agreement not being completed, with similar market impact.

Perhaps most intriguing would be the impact of a Labour government on market rates. As discussed, Labour policies would have a mixed impact on the economy. A Brexit referendum that delivered either a revoke of Brexit or a closer separation in the form of Customs Union would reduce Brexit uncertainty, and likely prove more growth-supportive than the current deal proposed by the Conservatives.

However, Labour’s radical economic agenda and proposed higher taxation would increase business uncertainty weighing on investment. Moreover, its fiscal programme would likely provide a significant boost to demand, while also raising inflation prospects, Bank Rate, gilt yields and sterling. We consider a Labour-backed Brexit deal would see the Bank tighten monetary policy in 2020 – subject to a fundamental revision to the BoE remit – pushing gilt yields back towards 2018 levels and eventually pushing sterling higher to around £1.40 to the US dollar – albeit likely after initial knee-jerk weakness. We would extend these forecasts even further if a Labour government oversaw a referendum that revoked Article 50.

[1] The Lib Dems won the seat by 1,425 votes. However, the BP, which did not stand in the 2017 election, took 3,331 votes, which we can assume came in the majority from the Tory party.
[2] The same poll showed 37% considered health and 29% considered the economy as a top issue.
[3] The November BoE Inflation Report assesses from Decision Maker Panel data that firms that describe themselves as having a “high uncertainty” surrounding Brexit – compared with “low uncertainty” – account for the majority of the deceleration in UK business investment. This deceleration, to 0.8% from 3.6% in Q3 2011–Q2 2016 to Q3 2016–Q2 2019, compared with 2.4% from 2.6%.
[4] “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning”, Winston Churchill, Nov 1942.
[5] The EU’s FTA with Canada – a model often cited for any UK deal – took seven years to negotiate; the EU’s announced FTA with Mercosur took nearer twenty years
[6] Campaign pledges were estimated to total around £35bn, or 1.6% of GDP and included town funding (estimated at £3.6bn), National Health Service capital funding (£4.7bn), increased social care provision (£1.5bn), education spending (£7.1bn), additional policing (£1.7bn), prison places (£2.5bn) and broadband coverage (£5bn). Longer-term projects included investment (£29bn) and a Northern Powerhouse rail link (£39bn), although the government is said to be considering scrapping plans for the High Speed 2 rail link, estimated to cost in excess of £50bn.
[7] Albeit that current stated Lib Dem policy is not to support a Labour government led by Jeremy Corbyn
[8] UK FTSE 250 stocks have outperformed the US S&P 500 equity index over the last month, the latter reaching a new record high on 8 November. The broader FTSE 100 index has seen a more lacklustre performance, changing by 1.5%. There has been a much larger proportion of companies with significant overseas earnings negatively affected by the translation effect of a significant rise in sterling.
[9] We also acknowledge an impact in global assets with the euro initially rising by 1.5% versus the US dollar and US Treasury bonds rising 24 basis points. At the same time, UK gilt yields rose 29bps in the immediate aftermath of the UK and EU achieving a Brexit deal.


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