UK election exit poll: suggests hung parliament - ING

Analysts at ING explained that while the exit poll suggests Theresa May's Conservative Party is the largest party, she doesn't have enough seats for a majority. 

Key Quotes:

"It means Jeremy Corbyn could well be Prime minister in days, creating massive uncertainty for markets and the outlook for brexit negotiations. Nonetheless, this is only an exit poll and a lot could change.

This election was meant to be all about Brexit, but it is clear that the electorate isn’t as focused on it as the Conservative party. Having pointed to a landslide at the start of the campaign, opinion polls weren’t looking great for Theresa May in the run up to today’s vote and it now looks as though her worst fears could come to fruition. 

The exit poll, jointly funded by the major UK broadcasters, suggests that Theresa May has not won enough seats to form a government – she will be 12 seats short. If correct, this creates massive uncertainty with the strong possibility that following discussions amongst all the parties Jeremy Corbyn could become Prime Minister in days. With everyone ruling out coalitions with one another, he would likely try and form a minority labour government that will rely on support from the Scottish Nationalist Party and the Liberal Democrats on an issue by issue basis.

Given Labour’s left wing tax and spend manifesto and desire to nationalise the utility, rail and mail industries, markets are not going to react well if this the outcome. The fear of higher deficits and national debt is leading to a spike in government bond yields. Meanwhile the greater chance of a Scottish Independence referendum in the next couple of years (Labour may have to offer this to get the support of the SNP) will intensify political uncertainty and it is already weighing heavily on the pound.

Some may say that at least this outcome reduces the chance of “hard” Brexit given a Jeremy Corbyn led government will likely be more relaxed on the issue of controlling immigration in negotiations relative to the Conservatives. They also appear more concerned about getting access to the single market. As such, there appears greater opportunity for compromise that could potentially yield a “softer” Brexit, something closer to EEA membership enjoyed by Norway.

However, a change of strategy at this point (given that there are only 21 of the 24 months set aside for negotiations left) and if the parties are not united could lead to an unclear negotiating position. This would make winning a good Brexit deal for the UK more challenging. Nonetheless, we have to remember this is just an exit poll of 30,000 people, the real results could be very different."