LONDON – Until very recently, everyone has assumed that Prime Minister Theresa May will cruise to victory with an increased majority in the general election on June 8.
But a handful of UK analysts are starting to argue that May’s campaign might be in more trouble among voters than the headlines suggest, and that the most recent economic data is pointing to a much slimmer margin of victory.
In some scenarios – especially if indicators continue to fall fast – her technical majority of 17 in the House of Commons might actually disappear, these analysts say, leaving Britain with a hung parliament.
Under that scenario – disastrous for the Tories even if they retain their position as the largest single party in Parliament – a coalition government around a Labour-SNP axis is one possible scenario, although publicly ruled out by both Labour leader Jeremy Corbyn and Scottish First Minister Nicola Sturgeon.
To be absolutely clear: The base case in all these scenarios is a Conservative win. But as we have learned repeatedly – with Brexit and Trump – the base case doesn’t always pan out in reality.
This chart compares the percentage lead the Conservatives received at the last general election in 2015 with the lead they have in the opinion polls right now. Purely as a matter of optics, the lines are trending toward the 6.5% level that the Conservative had two years ago. One poll from YouGov last week put the Tories only 5 points ahead of Labour - less than the margin last time:
The surface explanation for the Conservatives' poll numbers is that May has stumbled in her campaign do far: Releasing a manifesto that didn't contain any costs for her plans and proposing a social care funding policy that opponents quickly dubbed a "dementia tax" on old people with valuable homes.
But the economic data has been crumbling underneath May for some time, as Business Insider pointed out back in April. Since then, Q1 GDP growth has been rounded down to 0.2%, from the 0.3%, quarter-on-quarter. The decline came as a surprise to economists.
More recently the Economic Sentiment Index fell to 108.2 in May from 110.5 in April. (In that index, 100 represents the average.) This background decline is taking its toll on voters, according to Samuel Tombs of Pantheon Macronomics. His chart plots consumer confidence vs the size of the government's majority of every recent election.
The numbers are calling for a slim majority for May, even while political pundits have been wondering aloud whether May can get 100 or more seats than Labour:
"The index is substantially below the +6.9 reading seen in the month before the 2015 election, casting doubt over whether the Conservatives really will win a larger majority in next week's election," Tombs wrote in a note to his clients recently.
On a range of indicators - consumer confidence, wage growth, house prices, and unemployment - only unemployment is better now than it was in 2015. All the others are worse. (And unemployment has hardly moved since 2015.)
Here is a look at new car purchases. A change in tax law is partly responsible for the sudden dip, but even when you account for that, the decline is worrying:
Household savings hit a new low, too. This chart does not make voters look like financially happy people. The savings rate now is lower than it was in the 2008 crisis:
Deutsche Bank analysts Oliver Harvey and Mark Wall say: "There are more channels for slowing UK consumption than just declining real wages. Other sources of household income such as investments and benefits are depressed by low interest rates and austerity. Employment growth, a key contributor to overall consumption growth during the recovery, is slowing and structural factors may limit the UK's ability to generate stronger jobs growth. The household savings ratio is likely to be revised higher but has still fallen sharply as a result of declining income from investments."
They believe one potential scenario is that May receives a majority of fewer than 50 seats but greater than the 17 she commands now. That sounds OK, but could be a pyrrhic victory.
"PM May is likely to cling onto power, but without the majority needed to conduct negotiations effectively. The influence of hard- Brexit Conservative MPs over looming issues such as the divorce bill would be large and the chances of reaching a deal with the EU correspondingly low. The purpose of an early general election would have been negated, and significant economic weakness and/or market pressure would once again be required to secure a transitional deal, or the UK would crash out of the EU in March 2019."
Of course, these are merely scenarios that you can read from current data. There are others. The recent local elections are a concrete example of the Conservatives' recent dominance. And May still leads Corbyn in the personal leadership ratings.
But still, you can see why the Conservatives' camp has become so internally tense recently.