Theresa May dramatically seized the initiative on Brexit on Tuesday by calling a snap general election on June 8, as she sought a direct mandate for her plan to deliver a smooth British exit from the EU.
The pound rose on expectations that the prime minister would win a much increased Commons majority, allowing her to sideline implacable Eurosceptics in her Conservative party and ensure a phased Brexit concluding with a UK-EU free-trade deal.
Polls predict a heavy defeat for the opposition Labour party, which has been in disarray under the leadership of leftwinger Jeremy Corbyn.
Mrs May had only last month ruled out an early election, saying it would be “self-serving” and would create uncertainty, but on Tuesday morning she stunned Tory colleagues by announcing in Downing Street that she had changed her mind. The House of Commons will vote on Wednesday to trigger an election that had not been due until 2020.
Mrs May said she had “only recently and reluctantly” concluded that a poll was desirable, and blamed opposition parties and the House of Lords for weakening her negotiating position with the EU.
“Division in Westminster will risk our ability to make a success of Brexit. The decision facing the country will be all about leadership.”
Privately Mrs May told colleagues she feared that a general election in 2020 would significantly complicate Brexit, with other EU leaders using the impending poll to put her “over a barrel” in final negotiations due to conclude in 2019.
By holding an election now, Mrs May will not have to face electors again until June 2022, allowing her to negotiate a transition deal after Brexit takes effect, during which time Britain might have to apply EU rules including free movement.
Amber Rudd, home secretary, told the BBC’s Newsnight that Mrs May could use an increased majority as an opportunity “to arrive at potential compromises within the EU”.
The pound climbed as much as 2.7 per cent to a five-month high of $1.2905 on Tuesday, as investors bet the prime minister would use the vote deliver a softer Brexit.
“Not only does this neutralise Labour and the SNP, but it means she can negotiate a Brexit deal along the lines of what she wishes for, rather than having to appease the hardliners in her own party,” said David Owen, chief European financial economist at Jefferies.
The strength of the pound unnerved UK stock markets, which have been energised by sterling’s slide since the Brexit vote as global companies with earnings in dollars benefit. The FTSE 100 was 2.2 per cent weaker at 7,169 in late-afternoon trading.
Mrs May is expected to win parliamentary support for a snap election, overriding the five-year Fixed-terms Parliaments Act, which requires a two-thirds majority in the House of Commons to back a general election motion.
Mr Corbyn said on Tuesday that his party would support a vote, even though Electoral Calculus, a prediction website, forecast that his party would be left with just 170 seats, down from 229 at present.
“Labour will be offering the country an effective alternative to a government that has failed to rebuild the economy, delivered falling living standards and damaging cuts to our schools and NHS,” said Mr Corbyn in a statement.
According to the FT poll tracker, the Conservatives have an 18-point lead over Labour with bookmakers offering odds as low as 1/10 on a Tory victory. Electoral Calculus predicts a Tory majority 130, compared with 17 now.
Mrs May was cheered by Tory MPs as she addressed them on Tuesday evening, but privately some fear they could be exposed to a strong challenge from the Liberal Democrats, who are promising a second referendum on any final Brexit deal.
Mrs May told the Queen of her plans for an early election on Monday evening and explained her decision to Donald Tusk, European Council president, on Tuesday. Mr Tusk joked that, as with a good thriller, “First an earthquake, then the tension rises.”
Holding an election gives Mrs May her first opportunity to win a direct mandate to be prime minister. She took power last July without a public vote, after David Cameron resigned and her remaining rival in the Conservative leadership contest pulled out of the race.
The Tories’ existing majority would have made it hard for the government to push through its Repeal Bill, which transfers EU legislation into the statute book, without significant amendments. William Hague, the former Conservative leader, was among those to have called for an early poll in an attempt to win a larger majority.
A general election will allow Mrs May to scrap the 2015 Tory manifesto and campaign on her own policies, including the opening of new grammar schools which have been opposed by Tory moderates. Key policies from the Cameron era, including a commitment to spend 0.7 per cent of gross national product on international development, might also be changed.
The SNP, which has called for a second independence referendum by mid-2019, could use the election to win a new mandate for such a vote. An election comes as Northern Ireland remains in political turmoil, following the failure of the main unionists and nationalist parties to come to a power-sharing deal.