UK
Local elections take place in England and Wales on 2 May, with 107 local councils, 37 police and crime commissionerships, all seats in the London Assembly, and 10 directly-elected mayoralties up for election. While the outcome of the elections will not have any direct market-moving impact, a set of very poor results for PM Rishi Sunak's centre-right Conservatives could spur a leadership challenge that could further destabilise the UK gov't ahead of the general election expected in the autumn.
- Given the poor national polling for the Conservatives (trailing the main opposition centre-left Labour Party by ~20-25% in most polls), significant losses at the local council level are widely expected. Defending nearly 1,000 local council seats, well-known pollsters Conservative peer Lord Hayward and academics Colin Rallings and Michael Thrasher have Sunak's party on course to lose 400-500 seats.
- The Conservatives are also defending two notable mayoralties: the West Midlands and the Tees Valley. Should both incumbents be ousted and the party lose more than 500 council seats it could spark a flurry of letters calling for a leadership challenge to be sent by Conservative MPs to the chair of the backbench 1922 Committee. Should 52 MPs do so, a confidence vote on Sunak's leadership would be called.
- Such an event could lead to unexpected changes in gov't policy as Sunak and his ministers attempt to stave-off any ouster attempt. Another 'fiscal event' is possible ahead of the general election, and a leadership challenge could bring this forwards in an effort to quell rebellious right-wing backbenchers.
Chart 1. Betting Market Implied Probability of General Election Date (by Quarter), %
Source: Smarkets
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