In this pre-election analysis we have not set out to give a politically coloured view but one that concentrates on the likely impact of the policies of the 3 key parties on the UK quoted market. We have summarised the key policies that will touch the markets and provide a view of the potential differences in investment strategy given 3 scenarios;
- a Conservative victory
- a Labour victory
- a Liberal Democrat victory
There are inevitably common policies between the 3 political parties. We have chosen not to wholesale repeat recommendations in each party section below, so please read each party’s section – and not just the one that aligns to your voting preference or election outcome belief.
A hung parliament would, we believe, see the Liberal Democrats seriously influencing which policies would pass into law. We see a hung Government as the worst scenario most likely to trigger a de-rating of UK paper by Standard & Poor’s Credit Rating Agency (S&P) from an AAA rating. A rating cut would be disastrous with a major negative impact on exchange rates and a significant ripple effect on the market.
We agree with other commentators that the level of pain the average household will suffer in order to reduce the deficit is not evident in the manifestos. Decisive action on the deficit may result in pushing the UK into a double-dip recession – and the IMF may force our hand in implementing the harsh cuts necessary.
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Report published: 4th May 2010
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