What happened
Recent elections in the European Parliament, France and the UK confirmed the surge of far-right populism in Europe, increasing political fragmentation and policy uncertainty with various implications for businesses.
In France, the snap legislative elections resulted in a hung parliament of three blocs of similar size: the alliance of left parties - New Popular Front (NFP) won 188 seats, President Emmanuel Macron’s centrist alliance Together won 161 seats and the far-right Rassemblement National (RN) won 142 seats – an increase from 89 in the previous parliament but significantly below pre-election expectations.1
In the UK, although the far-right Reform UK increased its shares of votes significantly from 2% in 2019 (as the ‘Brexit Party’) to 14%, the left-wing Labour Party (LP) won the election with 34% of total votes – and a majority in Parliament, with 411 seats.2 This result ends a 14-year period of Conservative Party rule. The Conservatives secured 121 seats (losing 250).
What’s next
In France, current Prime Minister Gabriel Attal is continuing in power amid uncertainty over who Macron will appoint as prime minister to lead a minority government (of NFP or Together), a coalition government or a government of non-partisan technocrats. All scenarios come with significant levels of uncertainty. However, given the new parliament’s likely inability to agree to significant reforms, relative policy stability can be expected.
At the same time, political instability in France is likely given the government will likely be a minority government or based on an extremely fragile majority. This instability will persist at least until mid-2025 because another snap election cannot be held for at least one year. At the European level, a weakened Macron and an unstable government will mean France will be unable to drive ambitious initiatives.
In the UK, the new Labour government will likely avoid any transformational policy changes in the short term, with targeted public spending prioritized over big investment packages. The new government is likely to focus on reducing the budget deficit, investing in healthcare and the education system, improving industry decarbonization, and investing in renewables and the tech and Artificial Intelligence sector.
Collaboration between the UK and the European Union is likely to increase, most notably in the fields of trade and investment as well as security cooperation. There will not, however, be a de facto return of the UK to the EU single market and customs union.