With less than two weeks to go before UK voters head to the polls for the first Christmas election since 1923, the three most likely outcomes could have radically different implications for companies and the financial markets.

While the Conservatives are enjoying a lead in opinion polls, Labour is closing the gap, putting the chances of a majority Tory government in doubt and raising the prospect of yet another hung parliament (and another election), as well as the possibility of a coalition or minority administration headed by Labour’s Jeremy Corbyn.

Conservative majority

If Boris Johnson and the Conservatives manage to make good on their current poll lead and win a majority in Parliament, it may encourage more spending across the wider economy.

Clive Black, head of research at Shore Capital, says that while the result will not be received favourably across the whole of the UK, notably Brexit ‘remain’ strongholds such as London and Scotland, the resultant clarity on policy may provide “a sense of relief” across markets and possibly increase the chance of a boost to pre-Christmas trading as consumers feel more comfortable opening their wallets again.

Another beneficiary of a Tory majority will be the UK’s property stocks, particularly those with large holdings of London office space such as British Land Company PLC (LON:BLND) and Land Securities Group PLC (LON:LAND).

“The consensus is that there might be a slight re-rating [in the event of a Conservative victory]”, Tom Musson, equity analyst at Liberum, told Proactive.

He says the clarity on Brexit offered by a Tory win will be one of the key factors in an uptick in property sector optimism, which in turn will fuel more speculative building activity as a result of “more certain” investment conditions.

In terms of the wider economy, analysts at Barclays have predicted that a Conservative victory could see UK gross domestic product (GDP) grow by 1.5% in 2020 amid a “mix of reduced Brexit uncertainty, aggressive fiscal spending and probusiness policies”, with sectors such as financials and construction to benefit the most.

Meanwhile, Simon Black, head of investment management at Dolfin Financial, says that a Tory victory is already “largely priced into the market” and will see the pound heading above US$1.30 and a cut to interest rates from the Bank of England which could also boost equities.

This assessment was echoed last week by Jane Foley, head of FX strategy at Rabobank, who forecast that a majority for Boris Johnson could see sterling “towards US$1.32 on the expectation that political uncertainty will be reduced”.

However, she also warned that trade talks with the EU post-Brexit could still provide “plenty of scope for disappointment in 2020”.

Hung Parliament

The other most likely outcome among the bookmakers is yet another hung Parliament, which is widely expected to see the Conservatives as the largest party but with less than the number of seats required to form a majority government.

Shore Capital’s Black says a hung Parliament, the second is less than five years, will “go down like a lead balloon” among the electorate and likely cause yet more weakness in consumer spending and cause more headaches for the UK’s retailers.

He adds that more deadlock will increase the chances of another election and keep consumers “quite cautious” as the uncertainty continues.

“It would take quite a miracle for an upturn in [retailer] prospects in light of a hung Parliament”, he says, adding that in this instance the pre-Christmas sentiment will be more along the lines of “Oh, f**k”.

Musson adds that in terms of the property sector, a hung parliament will lead to “the opposite scenario” to that of a Tory win, however, potential benefactors of the uncertainty could be stocks considered “havens” by property investors such as healthcare property group Assura PLC (LON:AGR).

Labour-led government

A third, and widely considered the least likely outcome of the three, is a Labour-led government, supported either in coalition or through a confidence and supply agreement with parties such as the Liberal Democrats or the Scottish National Party (SNP).

Dolfin’s Black says Labour entering government will “essentially [be] a broad negative market event” that could see the pound drop below US$1.25 as well as more Brexit uncertainty as Labour negotiated a new exit deal and held another in/out referendum.

He adds that utility companies could see their shares suffer in the event of a Labour victory due to the prospect of nationalisation, as well as financial stocks amid tax hikes and expected cuts to interest rates.

In its own assessment of a possible Labour win, Barclays forecast 1% GDP growth for 2020, lower than their estimates for a Tory victory due to “higher near-term policy uncertainty”. They have also predicted that utilities and bank stocks will underperform the wider market.

However, a Labour government could see benefits for the aforementioned ‘haven’ property stocks, says Musson, with Assura and fellow mid-cap competitor Primary Health Properties PLC (LON:PHP) in line to benefit from Labour’s massive spending plans for health and social care.