UK General Election Impact on Brexit: Overview of Events for EM PE Funds
By Owen Lysak, Clifford Chance LLP
The UK has had its first general election since it voted to leave the European Union (EU) last year, just weeks ahead of the start of Brexit negotiation talks. The asset management industry continues to face a period of uncertainty whilst we wait to see how the UK/EU relationship will take shape, particularly what it might mean for UK and EU investor appetite for emerging market private equity funds.
This article gives an update on the implications—if any—that the UK’s general election on 8 June 2017 has on Brexit and provides an overview of the current state of affairs.
BREXIT
Implications from the UK General Election
The inconclusive outcome of the UK’s general election on 8 June 2017 has magnified the uncertainties surrounding Brexit. For business, those uncertainties mean that the prudent planning assumption remains that Brexit will happen and that it may be hard.
The UK election result – no overall majority
In theory, 326 MPs in the UK Parliament are required to form a majority, but Sinn Fein members do not, as a matter of principle, reducing the number of sitting MPs from 650 to 643. Neither the Speaker of the House of Commons nor his two deputies vote, reducing the effective number of MPs to 640 (but also reducing the Conservatives by two and Labour by one). A majority is, therefore, 321 MPs, and with the Conservatives, having 316 voting MPs after the general election, were still five short of an overall majority. Hence the need for the Conservatives to find a partner in order to offer them some hope of controlling the House of Commons.
The Conservatives’ chosen partner, and the only one which was realistically available, has been the Democratic Unionist Party, which has ten MPs for constituencies in Northern Ireland. The DUP was established by the (late) Rev Ian Paisley as the political expression of the church he founded, the Free Presbyterian Church of Ulster. The party came to the fore by opposing any form of compromise with Irish (Catholic) nationalists, whether in the Sunningdale Agreement of 1974, the Anglo-Irish Agreement of 1985 or the Good Friday Agreement of 1998, before reaching a power-sharing agreement with Sinn Fein within the Northern Ireland executive in 2007. The DUP has always opposed the UK’s membership of the EU, and, consistent with that position, supported Brexit in the referendum of 23 June 2016 (despite which, a majority in Northern Ireland voted to remain in the EU).