British Prime Minister Theresa May had a disappointing night. She believed her Conservative Party would expand its Parliamentary majority by forty, fifty, or even sixty seats.
In the end, they actually lost ground instead. They won 318 or 319 seats (one seat is outstanding), eight less than a majority. To pass legislation, May's government (again, the majority is 326 seats) must now rely on 10 Members of Parliament from Northern Ireland's Democratic Unionist Party (DUP).
Still, some perspective is due.
This is not, at least in the strict sense, a defeat for the Conservatives. They remain the largest party in Parliament and will remain the occupants of Downing Street. Additionally, unlike the 2010-2015 Liberal Democrat-Conservative coalition, the DUP offer ideological kinship to May. Reliant on the Prime Minister to deliver on their expectations as part of a coalition deal, the DUP have a vested interest in May's success. That means the next five years of government should be stable.
The markets reflect this confidence. Last night, when it appeared Jeremy Corbyn's Labour Party might actually unseat the Conservatives, the British pound collapsed. This morning, the pound stabilized and is now rising.
Second, and more important, this result increases the likelihood of an economically beneficial Brexit deal.
That's because it reduces the probability of a so-called "hard Brexit." Prior to the election, May was seen as pushing for a hard Brexit that would have withdrawn Britain from the European Union single market. That approach, May argued, was necessary to limit immigration into the U.K. from less wealthy European Union states. But the DUP oppose a "hard Brexit" and will demand concessions here as their priority for any coalition deal. Incidentally, the DUP will also push for higher government spending in Northern Ireland. They know that their support opens doors to the British Treasury and they want to get their hands on the cake.
The result will also affect Brexit deliberations within the Conservative Party. Many Conservative Parliamentarians now believe that May's Brexit approach led voters to abandon them. And with May's majority wiped out, the Prime Minister is vulnerable to pressure from these "soft Brexit" Conservatives.
From my perspective, that's not a bad thing. If Britain is able to remain an effective participant in the European Union single market, the benefits to British businesses will be significant. They will be able to sell their goods to wealthy European states such as Germany. We'll see what happens next but watch this space closely. If the pound and British markets rise next week, it will be a sign that the probability of a "soft Brexit" is rising.
Ultimately, there's one final question at play here. What happens to May?
Losing their majority, May has attracted great anger from Conservative colleagues. An internal Conservative Party leadership election might now be on the cards.