United Kingdom – Unwelcome Uncertainty
The parliamentary election scheduled for May 2015 figures to be one of the most interesting, and most uncertain for investors, in living memory. The incumbent coalition of the Conservatives and the Lib-Dems has achieved much of what it set out to do, reversing a spike in the sovereign debt burden that following a banking crisis, restoring positive economic growth, and creating room for a multi-year reduction of corporate and income tax rates while gradually closing the huge fiscal hole it inherited upon coming to power in 2010. Nevertheless, public faith in the mainstream parties is still lacking, and support for the governing parties has been eroded as a result of discontent over the curtailment of public services, wage freezes, and other sacrifices imposed on the electorate in the name of austerity.
Prime Minister David Cameron remains the most popular party leader, benefiting partly from the rather awkward image of his Labour Party counterpart, Ed Miliband, but the Conservatives are still struggling in opinion polls, which indicate that Labour is on track to secure 10 more seats than Cameron’s party, with less than six months to go before the elections. Still, the race remains tight, and it is not clear to what degree the right-wing UKIP might be able to attract votes away from the mainstream parties. There is also the potential for a revolt by voters in Scotland, who have traditionally favored Labour, in the wake of the defeat of an independence referendum in September.
All indications are that the victor in the next elections, whether Labour or the Tories, will need at least one coalition partner to ensure a parliamentary majority. The Lib-Dems’ expected losses could leave it short of the number of seats required to make it the partner of choice. Under those circumstances, the lead party might turn to the SNP, which would demand significant autonomy for Scotland as the price for its participation, or, in the event of a victory for the Conservatives, possibly even UKIP, a development that would increase the risk of the UK’s departure from the EU.
Moving beyond current opinions, a seasoned look into the most pressing issues affecting geopolitical risk today.EXPLORE INSIGHTS SUBSCRIBE TO INSIGHTS