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Can 'emboldened' Labour form a minority government?

Can 'emboldened' Labour form a minority government?

While the Labour party confounded expectations last night, it still failed to win a majority, making this the third successive election it has lost.

However, under Jeremy Corbyn’s leadership it has significantly increased the number of seats it won to 261 – up from the 232 it had after the 2015 election. When the snap election was called in April, many were expecting Labour to suffer its worst defeat in years and the party was 21-22 points behind the Conservatives.

Now although Corbyn and shadow chancellor John McDonnell have said they are ‘ready to serve the people’ and asked Theresa May to resign, they will have to rely on other parties’ kindness if they are to move forward.

At least this increase in support should be enough for the party to avoid another summer of infighting and another leadership challenge.

However, one good night does not make all the problems of the party go away.

While Corbyn’s future seems secure, those in the party who have been against him from the start, or are more in the centre of the spectrum will be looking for ways to tone down Corbyn’s policies to appeal to more people in another election.

It remains a question whether they will be able to pull Corbyn more to the centre but retain the young, more left-leaning voters who rallied behind him specifically because he represented something different than previous centrist governments of both Tony Blair and David Cameron.

In the aftermath of the shock result Corbyn demanded May step down: ‘It was her (May’s) campaign it was her decision to call the election. This morning it doesn’t look like a strong government, it doesn’t look like a stable government.'

Responding to a question on whether he should step down as he failed to win the election, he added: ‘My party had a huge increase in its vote. I think everyone in the Labour party and everyone who supported the Labour party should be very proud of what we achieved yesterday. We put forward our policies and they’ve gained an amazing response and traction. I think it’s clear who won the election.’

Another election in the autumn

Fund managers have mainly pointed out that the result has weakened May's hand, especially in relation to Brexit negotiations but they are doubtful that Labour will form some sort of minority government. 

Speaking to Andrew Neil on the BBC, McDonnell said: 'If we can form a minority government, I think we can have a stable government. We would be able to produce a Queen’s speech and budget based upon our manifesto, which I think could command majority support in parliament, not through deals or coalitions but policy by policy. That would prevent another election.'

However, James Ross, fund manager at Janus Henderson said: ‘Labour, notwithstanding their much better-than-expected result, seem less likely to be able to form some sort of a 'rainbow coalition', especially given the collapse in support for the SNP and the unwillingness of the Liberal Democrats to be part of another coalition government.

'However, Labour, led by Jeremy Corbyn, will undoubtedly be emboldened by this result and will be in a stronger position, both in the House of Commons and in the run up to the next election, whenever that will be.'

Trevor Greetham, head of multi asset at Royal London Asset Management added: 'A Labour-led progressive alliance is possible but we expect the Conservatives to form a minority administration reliant on a confidence and supply arrangement with Ulster MPs. This will not be a strong and stable government, so another election is likely to follow after a short period under a new prime minister, perhaps in the autumn.'

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