Financial technology company Centtrip has revealed its predictions for how the currency markets might react to any of the three possible electoral outcomes of the UK’s first December General Election since 1923, taking place today (December 12).
Volatility in the foreign exchange (FX) markets can have a significant effect on the music industry, which in turn may have a major influence on sectors such as live touring income, royalty payments and other areas of the business.
Artist managers, promoters, accountancy departments and others are closely monitoring the vote and deciding on how to mitigate their risk in the event of sterling fluctuating by as much as a predicted 10%.
According to Centtrip, the election has three likely outcomes:
1. “A Tory win of an outright majority will give political autonomy and is likely to end the Brexit deadlock, which will strengthen Sterling. However, a Tory win has already been priced in by traders, seeing Sterling rally four cents against the Dollar over the course of the campaign. If Boris Johnson fails to capitalize on his poll lead and ends up with a smaller-than-forecast majority, the Pound will give up its recent gains.”
2. “While a Labour win is a long shot according to the polls, it should not be discounted. Pollsters have gotten it wrong before. However, businesses have serious concerns about a Jeremy Corbyn premiership, which could lead to a rapid withdrawal of investment from the UK and a potential run on the Pound.”
3. “However big the gap is between the Conservative and Labour parties, the UK could still end up with another hung Parliament. This will mean a number of things, including no working majority, continued political paralysis, further extensions to Brexit and, inevitably, a weaker Pound.”
Added Centripp: “In the event of a majority, market focus will shift to the 11-month window of opportunity for Britain to sign new trade deals with the European Union on the assumption the Tories will push through the withdrawal agreement by January 31st 2020.
“This is likely to keep investors on edge. Should the Conservatives fail to win an outright majority, it will be a big shock for the markets and the UK will be in the same place as before the election.”
“This is a historic election, which will have a major impact on the currency markets whichever way people vote and therefore the music industry needs to think carefully about how it mitigates risk moving forward.”
Freddy Greenish, Centtrip
Freddy Greenish Head of Music, Film & Entertainment at Centtrip, said: “We have studied the three likely outcomes of the election and our clients are making decisions based on that analysis.
“This is a historic election, which will have a major impact on the currency markets whichever way people vote and therefore the music industry needs to think carefully about how it mitigates risk moving forward.”Music Business Worldwide