Against the odds Labour leader Jeremy Corbyn has defied critics to see his party grab numerous seats from the Tories, resulting in a hung parliament for the UK.
However, with still the most seats in parliament but shy of a majority, the Conservatives could look to form a coalition government with the Northern Irish Democratic Unionist Party, who are known for their eurosceptic stance.
Here’s how experts expect the economy and Brexit to fare in the current political environment.
What it means for the economy
Sterling fell off a cliff overnight falling to as low as 1.27 against the dollar, as an early exit poll pointed toward a hung parliament. Meanwhile, the FTSE 100 index opened higher helped by the weaker pound.
“At the margin, lower sterling will push up inflation a little further than previously forecast, which will have a small negative effect on household spending,” says Azad Zangana, senior european economist at Schroders.
“The Bank of England is unlikely to change its policy in the near-term but it will offer reassurance that it stands ready to act in the event of financial instability.
Zangana adds that if Theresa May manages to secure a minority government, it will likely be short lived.
“Looking ahead, there is a high chance that any Conservative minority government may not last beyond a year. It will likely struggle to pass any finance bill.
“For the economy, households and corporates will be concerned by the increased political uncertainty. However, at the same time, the paralysis in Westminster will mean fewer changes to fiscal and economic policy. Despite this, we expect a pull back in household spending and business investment which will exacerbate the slowdown currently being experienced.”
What it means for Brexit
May’s primary reason for calling an election was to secure a mandate on Brexit. However, without even a majority in parliament, the Conservatives’ ability to broker a deal with the EU will likely be significantly weakened.
“Serious damage has been done to the UK’s negotiating position,” says Schroders’ Zangana. “Without a strong mandate, Europe can ignore the UK’s demands. Even the UK’s threat to pull out of negotiations will now appear hollow and lacking the support of the British public.”
With the Conservatives expected to try and strike a deal with the DUP, Ricky Nelson, head of corporate dealing at Halo Financial, says: “The Conservatives and the Democratic Unionist Party are awkward bedfellows, as, although the DUP are Pro-Brexit, they have also consistently voted against Tory austerity policies. However, the speed with which Mrs May has acted in cobbling together a coalition will certainly be greeted warmly by markets in the short term, as there is unlikely to be a power vacuum at the heart of Westminster just as the Brexit process is about to begin in earnest.
“For now, the Brexit talks will not be derailed, however May is now seen as vulnerable and could be subject to leadership challenges in the future, particularly if negotiations with our European partners do not begin well.”
How will personal finances be affected?
Tom Selby, senior analyst at AJ Bell, says that the result is the “worst possible outcome for pensioners and people saving for their retirement”.
“It means that key decisions around the state retirement age, the state pension triple lock, social care funding and pension tax relief are all going to take a back seat while the wheels of Westminster slowly turn,” he explains.
Tom McPhail, head of policy at Hargreaves Lansdown, adds that increased support for Labour means that even if a minority Conservative government is secured there will be less austerity, more government spending, more of a tax burden imposed on the wealthy.
“The Conservatives have championed raising the personal allowance to £12,500 which will probably still happen; increasing the higher rate threshold may not be so easy to deliver now and the tax burden on the wealthy and higher earners is only likely to increase.”
On savings, McPhail adds: “The imperative to introduce a coherent savings policy to encourage and reward long term savings and investments still exists, even if it may now be harder for a minority government to deliver. However the argument in favour of a savings commission to produce a consensus policy looks stronger. We hope this will become a priority for the next government.”