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The European Union flag is displayed on stage during the launch of the Liberal Democrats’ manifesto in London, U.K., on Wednesday, May 17, 2017.
With the counting for the U.K. General Election still ongoing, analysts are contemplating what the result means for Brexit negotiations, as Prime Minister Theresa May appeared in danger of losing her parliamentary majority.
The Conservative leader called a snap election to strengthen her parliamentary majority and have more power and freedom to negotiate Britain’s exit from the European Union. However, the projected results — which are still not confirmed — and the possibility of a hung parliament could make talks with Brussels “more complicated,” according to Guntram Wolff, director of the Brussels-based Bruegel think tank.
“It may be impossible to compromise due to domestic political pressures in the U.K.,” he told CNBC. “So a no-deal scenario may become more likely.”
According to the BBC, projections indicate the Conservatives will win 318 seats, falling short of the 326 needed for a parliamentary majority.
Karel Lannoo, the chief executive officer of the Centre for European Policy Studies think tank, agreed. “A small majority will not help. This means a lot of infighting will go in the Tories (Conservatives) and this will not be helpful for the EU either, as no clear position will emerge.”
A senior EU official told CNBC at the end of May, when polls were projecting a stronger presence in parliament for the Conservatives, that “the election will certainly help (Brexit talks).”
“We need a strong leader,” the official said on the condition of anonymity due to the sensitivity of Brexit talks, adding that nonetheless the divorce process will have to happen in the step-to-step approach that the EU wants.
Meanwhile, John Hardy, head of forex strategy at Saxo Bank, told CNBC via email that the outcome of the British vote will have a little impact on Brexit, given that the European Union will not change its stance on the negotiations.
“I think the EU’s stance will be little affected by the outcome of the election unless there is a sense that Brexit can somehow be re-engineered into an eventual Bremain referendum,” he said.
The small Conservative win coupled with the possibility of a hung parliament sank the pound in the early hours of Friday. The currency dropped about 1.7 percent against the dollar to $1.2738.