Viewpoint: The curious similarities with the 1892 general elections

Costas Milas is Professor of Finance at the University’s Management School.

“The Financial Times published (earlier this week) a very interesting piece in which constitutional expert Vernon Bogdanor explained how the rules work if no party wins a majority.

Veron Bogdanor, noted amongst others “Mr Cameron might seek to prove to the country that Labour can only govern with the aid of the Scottish National party. Lord Salisbury did the same in 1892 to show that the Liberals could only govern with the aid of the Irish nationalists.”

Let me discuss, from an economic point of view, the possible similarities and differences with the 1892 elections. The July 1892 general elections resulted in a hung parliament. Lord Salisbury, leader of the first party (Conservatives), was defeated in a vote of no confidence. Then, Gladstone (Liberals) led a minority government dependent on Irish Nationalist support.

Notice, however, that the events of 1892 did not undermine investor confidence in the economy. Indeed, according to Bank of England historical data, the government bond yield fell from 2.68% in 1891 to 2.65% in 1892 and even further to 2.60% in 1893!

At the same time, stock market uncertainty (measured by the 4-year moving standard deviation of the return on the UK stock market index) dropped by 25% in 1892 compared with 1891.

Arguably then, investors felt sufficiently confident that, with three (large) parliamentary parties securing 99% of the votes, the financial/economic risk of government instability was “negligible”.

Today, however, things might turn out quite differently (especially if we have “some” re-run of history in terms of Labour relying on SNP).

Indeed, the prospect of a hung parliament with multi-party seats followed by a possible BREXIT referendum, is more likely than not, to undermine investor confidence and take its toll on economic performance.”


Bogdanor, Vernon. “What happens next in a hung UK parliament”. The Financial Times, 5 May 2015.

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