Is U.K. Prime Minister Theresa May poised to snatch defeat from the jaws of victory at next week’s elections?
According to a poll by YouGov, published Wednesday by The Times of London, May’s Conservatives are on course to lose their slim majority in the House of Commons, although they would still be the largest party with 310 seats (316 are needed for a majority).
Such a result appeared unthinkable only six weeks ago, when May gave in to the temptation presented by her massive lead in opinion polls and called a snap election in the hope of winning a bigger majority. Back then, the pound rose 2% on hopes that a larger majority would insulate her from pressure from the right-wing fringe of her party and let her negotiate an orderly exit from the European Union in relative peace and quiet.
The trouble is that a general election is not just about the Brexit issue, but also about social, demographic, and economic divides that run just as deeply through Britain (or any other advanced economy). Specifically, May’s Tories have suffered from a badly botched effort to address the challenges of an aging population, in the form of making wealthier, older voters contribute more to the cost of their nursing care.
The proposal itself provoked outrage among older, middle-class voters—the traditional bedrock of the Tory vote. May had already signaled she would drop the promise made by her predecessor David Cameron to keep pensions rising above the rate of inflation, and this latest grab was a step too far for the faithful. The Prime Minister was forced into an embarrassing about-face and the whole affair badly damaged the image of “strong and stable leadership” that May had been trying to project.
The irony, of course, is that redistributing government spending away from the old to the young is precisely what the U.K. needs to do as it faces the challenges of life after Brexit. The self-imposed separation from the deep labor pool of the EU is exposing the U.K.’s chronic skill shortage in sectors from farming to car manufacturing and its sprawling National Health Service.
Sign up: Click here to subscribe to the Broadsheet, Fortune’s daily newsletter on the world’s most powerful women.
Britain already spends nearly twice as much on pensions (159 billion pounds) as it does on education (86 billion), and 40% of the 142 billion in health spending goes to the over-65s. This age-dependent imbalance is set to get worse in future, because older voters amount for an ever-greater part of the electorate, and because they tend to vote more regularly than younger ones. May’s instinct was to use an opportune moment to implement a much-needed change in policy. But reports suggest that she failed to consult or even warn even senior party colleagues about it ahead of time. Conservative lawmakers are generally loyal to a fault to their leaders, but not when their political careers are jeopardized so lightly.
The upshot appears to be that the chance of a Tory landslide next week is now much smaller. While the YouGov poll is an outlier, and has a large margin of error, this chart from investment bank Berenberg shows how all the major polling firms show the Tory lead narrowing in the last couple of weeks. Berenberg analyst Kallum Pickering says the chance of a ‘hung’ parliament, with no party commanding a majority, has now risen to 25%.
The pound fell 0.5% Wednesday in reaction to the YouGov poll, but by late afternoon had made good most of its losses against the euro and was actually 0.4% up against the dollar. The point, says Vincenzo Scarpetta, an analyst with the Open Europe think tank in London, is not that a Tory meltdown would stop Brexit, or even lead to a “softer” version that causes less disruption to trade, migration, and investment. Rather, “a hung parliament can create more uncertainty” over the final outcome—and the longer and deeper the uncertainty, the more it will weigh on the U.K. economy in the meantime.
For all that, the country’s bookmakers are unmoved. Paddy Power still reckons that the Conservatives will end up with 365 seats, which translates into a working majority of more than 100, and sees only a 16% chance of the Tories not having a majority at all.