The economy affects election results – “it’s the economy, stupid”. The financial crisis did for Labour in 2010, and Rishi Sunak well knows what the highest inflation in four decades is doing to UK politics today. But can election results affect the economy?
Obviously, who gets elected matters – as this column discussed last year, a change of government tends to be followed by more policy change and faster economic growth – but specifically do the results – and how surprising they are – matter? Yes, concludes new Warwick University research examining 13,600 opinion polls before 233 elections in 51 countries.
It turns out that in strong democracies results that are more of a “surprise” relative to polls immediately pre-election are followed by lower growth. The size of the effect is itself surprisingly large: an extra percentage point surprise in vote shares is associated with 0.37 percentage points lower growth one year after the election.
What’s driving this result? Lower business investment (something the UK really can’t afford), as firms hold off decisions in the face of higher uncertainty. This is like a mini-version of the Brexit decision causing investment to flatline post-referendum.
Labour will say this shows we’d better all vote for them to match the current polls, but note the growth impact of surprise election results is particularly strong when it’s the left doing surprisingly well (remember in the olden days it was leftwing, not rightwing, populists winning surprise victories). The real lesson is for pollsters – who’d better get their 2024 predictions right – and the rest of us, who mustn’t change our mind at the last minute. The economy’s counting on us.
• Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org
