Weak and wobbly
The election result has weakened Britain’s hand in the Brexit negotiations with the EU, not strengthened it as Prime Minister May had hoped. Indeed, the original decision to hold the election was questionable as a European Union negotiating tactic as it cut down the amount of time to negotiate a Brexit deal given that the two year negotiating period has already started following the triggering of Article 50 legislation in Britain back in March. The time spent negotiating a new coalition government will probably eat up even more negotiating time and then, of course, there could be the issue of incorporating any Brexit-related demands from a coalition partner into the discussions and that too will eat up more time. When many suggest that a two-year timeline is already very short, the election result will only increase fears that talks might fail. The other side of the coin is that the new parliamentary arithmetic could make it more likely that MPs will vote in favour of any deal with the European Union that is delivered before the March 2019 deadline. That might offer some solace to the pound although this is clearly an issue for nearly two years’ time, not now.