Britain’s financial stability could be under threat if Marine Le Pen’s National Rally wins French snap, Bank of England warns

The French election poses a threat to Britain’s financial stability if Emmanuel Macron loses to Marie Le Pen, the Bank of England has warned.

The National Rally is on course to win the snap vote called by President Macron after the hard-Right party’s crushing victory in European parliament elections last month.

Bond markets — which lend to governments — are closely analysing the polls in France as well as in Britain and the United States, with some politicians making big spending promises despite high debt levels.

The Bank cited the issue in its latest Financial Stability Report.

‘Policy uncertainty associated with upcoming elections globally has increased,’ it said. 

‘This could make the global economic outlook less certain and lead to financial market volatility.

‘It could also increase existing sovereign debt pressures, geopolitical risks, and risks associated with global fragmentation, all of which are relevant to UK financial stability.’

The Bank said such factors could ‘make the economic outlook less certain and could lead to market volatility… as already observed in response to the unexpected news of French parliamentary elections over the summer’.

The Bank made clear that worries about public finances abroad could be brought home to the UK.

‘High public debt levels in major economies could have consequences for UK financial stability and interact with other risks,’ the Bank said.

That could happen if bond investors’ worries about public debt spread across the world.

Aside from Macron’s election, the Bank said that other factors such as developments in the Middle East, Russia’s war in Ukraine and US-China relations all represent ‘sources of material geopolitical risks’

Households and businesses could then find it harder to borrow and government borrowing costs could rise, making it harder to find the money to respond to future shocks.

Meanwhile, threats posed by conflict in the Middle East, Russia’s war in Ukraine and US-China relations all represent ‘sources of material geopolitical risks’.

‘For example, developments in the Middle East, including disruption to shipping through the Red Sea, or further escalation of conflict in Ukraine, could disrupt global trade and supply chains and cause sharp moves in commodity prices,’ the Bank said.

Such moves could trigger a range of consequences such as higher inflation and interest rates or market turbulence.