Betting Markets Shift Toward Q224 Election After Autumn Statement

The apparent ‘giveaways’ in Chancellor of the Exchequer Jeremy Hunt's 22 Nov Autumn statement, most notably the reduction in the main rate of National Insurance contributions from 12% to 10%, has raised speculation that PM Rishi Sunak could look to hold a general election earlier than anticipated. Political betting markets showed an increase in the implied probability of the next election taking place in Q224, from 23.3% the day before the statement to 30.3% presently. Q424 is still seen as the most likely window for the election among bettors, with a 57.8% implied probability (down from a peak of 69.4% two weeks ago).

• A spring/summer election in 2024 would likely come on the back of even more ‘giveaways’ in next year’s Budget Statement, whether in the form of income tax cuts or increases to income tax thresholds to account for ‘fiscal drag’. A sizeable pre-election budget giveaway would in turn would impact the outlook for UK gov't finances well beyond the eventual date of the vote.
• However, a Q224 election would remain a risky prospect for Sunak and the Conservatives. Opinion polling in November shows the party trailing Labour by ~17-21%, enough to see the Conservatives ousted and a comfortable Labour majority in the House of Commons. Any prospect of an early election will depend on a swift turnaround in polls with the autumn statement measures having a better-than-expected impact on voter sentiment.

Source: Smarkets