The prospect of Boris Johnson keeping the keys to No 10 and signing a deal to leave the EU by 31 January was welcomed by many City institutions on Wednesday.
Currency traders were also among those to view a fresh Tory mandate as positive news for the UK, sending the value of the pound to $1.287, making a rise of 6% over the last four weeks.
Analysts at the financial broker Think Markets said the pound had been boosted by the likelihood of a Johnson victory, which meant “the threat of no-deal Brexit has receded.”
Echoing much of the City’s view on the election outcome, they added: “Looking at the polls, it is highly likely that Boris Johnson would win the election and this means the current deal that he holds with the EU is going to be the basis for divorce with some minor alterations.”
Analysts at Berenberg bank said a “Boris Bounce” could also be expected once the prime minister adds tax cuts to his prospectus of higher public spending.
The firm’s chief economist, Kallum Pickering, was blunt in his view that a Johnson administration, which he said appeared the most likely outcome at the moment, would cheer investors.
“It would put the UK on the path to an orderly Brexit on 31 January 2020 and it would do away with the risk that Labour leader Jeremy Corbyn could ever become prime minister and damage the UK with left-wing economic policies,” he said.
The Tory and Labour parties are not expected to publish their manifestos for two weeks.
Corbyn said Labour would prepare “the most ambitious and radical campaign for real change that our country has ever seen”, while Johnson claimed his would occupy the centre ground with extra spending on the police, schools and infrastructure.
There were, however, dissenters in the City who said a Labour victory or a hung parliament offered clear benefits for the business community.
The consultancy Capital Economics said a Tory government would deter business investment by continuing to keep a no-deal Brexit on the table until 2020, while a Labour government would exclude a no-deal Brexit and offer the hope to exporters of remaining inside the EU following a second referendum.
Trevor Greetham, a respected analyst at Royal London Asset Management, said that while sterling had become less volatile since the election was called, both a Tory or Labour victory would send the pound into reverse.
“A hung parliament with the Liberal Democrats as kingmakers would temper some of [Labour and Tory] extremes and it would mean a confirmatory referendum in 2020, with remaining in the EU as an option,” he said.
Most analysts said parliament’s decision to hold an election during the crucial three-month shopping period before Christmas – often referred to as the golden quarter – could make the current tough trading conditions on the high street even worse for retailers.
Graham Bushby, head of restructuring at accounting firm RSM, said retail insolvencies were already high and could increase as creditors, who usually keep faith with shops until at least after Christmas, throw in the towel early.
“A general election is likely to make life pretty tough for retailers who rely on the golden quarter in the lead-up to Christmas to boost revenues and profits,” he said.
Adding to retailers’ woes, the latest GfK consumer confidence survey reported a sharp decline in respondents saying their personal finances would improve over the next year.
Olivier Konzeoue, a currency trader at stock broker Saxo Markets, said large businesses, and especially retailers, needed the election to deliver a clear outcome.
“FTSE companies such as retailers and exporters could come under pressure. These businesses need the withdrawal agreement to be put in place as any extension proves costly – impairing their profitability,” he said.
“Investment plans would have to be delayed yet again and export contracts put on hold while retailers could see their revenues hit during the crucial Christmas sales period.”
Three key issues:
Utility companies immediately came under pressure following the election announcement as the prospect of nationalisation by Labour hit their values. The shadow chancellor has hinted that he will purchase the shares of water companies at a discount price. A Tory victory would see a dramatic recovery.
Banks have secured temporary access to European markets and are largely insulated from a no-deal Brexit. But they will be looking for a comprehensive trade deal to give them longer term access and a long wait for a trade agreement would knock their shares. “The banking and insurance sectors will welcome any progress [towards a deal],” said Konzeoue.
The health service will be a crucial battleground as Johnson seeks to defend himself against accusations that he plans to outsource large parts to private companies, possibly following a trade deal with the US. Private health companies have increased their share of NHS work in recent years and a Tory victory is likely to give them greater leverage in the race for more contracts.