Why the markets want a stable coalition government

April 24, 2015 10:56 AM
Originally published by UK Liberal Democrats

The Liberal Democrats have released a dossier that shows businesses, the City and markets all fear an economic lurch to the right or left.

The document outlines how the financial markets in the UK have expressed their displeasure with Conservative and Labour plans for the UK economy over the next Parliament.

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The Conservatives want to lurch dangerously to the right with a plan to cut £50bn more than the Liberal Democrats, while Labour want to lurch to the left and borrow £70bn more than the Liberal Democrats.

For the markets the most favourable option would be for a stable government anchored in the centre ground that delivers both a fairer society and a stronger economy.

HSBC said:

"The political outcomes that worry the market the most would be outright victories.

"A Labour victory would bring market worries about a fiscal deficit to the fore, despite Labour's best efforts to allay such concerns.

"An outright Conservative victory would bring an EU 'in-out' referendum."

AXA said:

"We think markets would react most positively to policies that were closer to the political centre ground."

While Goldman Sachs have also said:

"The existing coalition has established some market credibility as a consequence of the stabilisation it has achieved in the UK economy since 2010."

The markets have also raised their concerns with regards to a Labour majority government, with Allianz Global Investors saying:

"Should Labour be returned to power, we face the possibility of Ed Balls potentially becoming Chancellor despite a questionable past track record of presiding over a previous collapse in the UK's finances."

And Merrill Lynch have also raised concerns saying:

"A left wing coalition around Labour, would, in our view … embark on structural changes which could in the medium run reduce the appeal of the UK as a business location and trigger, ultimately, a deterioration in potential GDP growth."

And with regards to a Conservative outright victory, Citigroup said:

"A Conservative-led majority government would raise Brexit risk… [and] We believe that Brexit (if it happens) would be highly damaging for the UK economy."

And International Finance Magazine raised concerns over the threat of Britain leaving the EU if the Conservatives won an outright majority adding:

"A Conservative-led administration could lead the UK out of the EU, particularly if it has to work with UKIP, and that is a prospect that frightens many investors and businesses."