May Announces Snap General Election On June 8th

Wow. Just when you thought Brexit was going to be the only political story over the next two years, you thought wrong!

Theresa May on Tuesday morning announced that she would hold a snap General Election to be held on June 8th. That’s around seven weeks away. Prepare for political commentary from all sides of the media to the point where you’ll want to just bury your head in the sand.

Before we get into the why’s and what-for’s, these were the reasons she gave:

In recent weeks Labour have threatened to vote against the final agreement we reach with the European Union.

The Liberal Democrats said they want to grind the business of government to a standstill.

The Scottish National Party say they will vote against the legislation that formally repeals Britain’s membership of the European Union.

And un-elected members of the House of Lords have vowed to fight us every step of the way.

If we do not hold a general election now, their political game playing will continue.

Much has been said by the opposition about how May has insisted up until this point about how a General Election wasn’t on the table, and how this is a massive u-turn. Well, yes it is a u-turn, but something has obviously changed in the mind of Mrs May to persuade her that it is now time to consolidate that massive lead over Labour in the polls, increase her majority in Parliament to three figures, secure an elected mandate and improve her Brexit negotiatin stance.

And make no mistake, Brexit is the single biggest battleground that this election will be fought on.

How the markets reacted

It wasn’t a good day for the FTSE. After the General Election announcement the FTSE 100 fell 2.46% or 180 points. Most of that would be down to the election news, but there was some bad earnings data out over in the US today and geopolitical tensions will have had an impact too.

From the perspective of the glazing industry, the good news came in the currency markets as Sterling surged to a 6 month high against the Dollar:

Credit: Bloomberg

At one point Sterling broke the $1.29 barrier for the first time in a long time. But why the rise?

There’s a few reasons at play here. Every single poll indicated to a large Tory win, which will massively increase her majority, therefore giving her more control over her party, a genuine mandate from the general public, which reinforced her negotiating position in Europe. All of this points to more certainty, something markets like.

Also, the Dollar is now being seen as over priced as well as Sterling being over-sold and under-valued. That thinking is now coming home to roost. Sterling had risen steadily in the days leading up to today.

The FTSE fell as much as it did as many of the companies based on that stock exchange make their profits in Dollars, so a stronger Pound means their profit Dollars are worth less, hence the sell off. It’s the weakness in the Pound so far that has been one of the main drivers of the rise in the FTSE since the EU referendum.

Importantly from a fenestration perspective, if Sterling can find a path to a steady recovery, it can be a downward force on inflation, keeping price rises to a minimum, it will help with fuel prices at the pumps, and will hopefully ease the price pressures on our industry’s suppliers.

It’s also worth noting that the Pound versus the Euro nearly touched 1.20 for the first time in a long time. Many are saying that if polls continue to show a strong Tory win, our currency can expect further rises.

A pause on window and door purchases?

Most believe that as we approach a general election, home owners tend to put larger purchases, like new windows and doors, on the back burner whilst the election period passes through. Home owners who might be hesitant to spend big sums of money not knowing how the result will turn out.

Normally, I would agree with that point of view. Especially in the last election. It was close, and the polls didn’t see a small Tory majority coming. This time round however, the scenario is very different.

Every single opinion poll shows Labour being smashed, the Tories winning a massive majority and the Lib Dems recovering plenty of their lost seats, presumably in traditional Labour areas. Even if the opinion polls are a bit of a way off like they have been in recent times, they won’t be wrong enough to cause a shock. And if polls continue to show an obvious result, I suspect home owners may not feel as cautious as they normally would when it comes to big purchases. Plus, if the opinion polls and the eventual result turn out to be fairly accurate, experts are already saying that Sterling could rise further. A positive outcome for spenders.

There are some formalities to get out of the way. There is the Fixed Term Parliament act to overturn on Wednesday. The law that was passed by David Cameron so that there was an election only every five years. There needs to be a large majority vote in Parliament to overturn that. All major parties have come out in favour of an election, so that will be straightforward. There are local elections in early May, which may give us a sense of how the national voting might go. Then the PM has to dissolve Parliament and then the campaigning really begins.

What are your thoughts? Is this an opportunity to boost mandate or crush the opposition? Are you looking forward to another vote are are you vote weary? Your comments are welcome via the section below.