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UK vote baffles voters, investors too

Thursday, April 30, 2015 - 02:46

The final countdown is on for the UK general election. With less than a week to go until the polls open, the prospect of some new political forces jockeying for position in a hung parliament presents voters with a confusing set of options. And, as David Pollard reports, investors too are split over what it all means.

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It's an old cliché: markets like certainty. One thing certain about the run-up to this election is ... well, nobody's really sure. Even over this week's growth numbers. They came in at 0.3% quarter-on-quarter and not the forecast half a per cent - prompting very different responses. From, first, Dominic Johnson of Somerset Capital and then Mike Ingram of BGC Partners. SOUNDBITE (English) DOMINIC JOHNSON, CEO, SOMERSET CAPITAL MANAGEMENT, SAYING: ''The long-term trend of our growth is way ahead of our competitor countries, and frankly you're always going to get seasonal and quarterly volatility and the overall figure of 2.5 to 3% is phenomenal.'' SOUNDBITE: BGC MARKET ANALYST, MIKE INGRAM, SAYING (English): ''There's been a dramatic slowdown in the services sector, which is obviously a major part of the UK economy - growth there of just 0.1 per cent, the slowest growth that we've seen there in five years.'' At least there are few signs of the usual pre-election distress. Investors calm, says Jeremy Batstone-Carr of Charles Stanley. Or perhaps not. SOUNDBITE: CHARLES STANLEY CHIEF ECONOMIST, JEREMY BATSTONE-CARR, SAYING (English): ''It's really been quite surprising how sanguine investors appear to be in relation to the UK election.'' SOUNDBITE: BGC MARKET ANALYST, MIKE INGRAM, SAYING (English): ''I wouldn't agree with that.'' Where investors do agree is that the Conservatives and the main opposition Labour party have managed to get over a core message of deficit and debt reduction. That message, though, increasingly usurped by arguments over tax. The Conservatives pledge no rises in income tax, VAT and National Insurance. Labour goes the other way - it's run into flak over claims that a 50% rate on higher incomes will yield billions in extra revenues. SOUNDBITE (English) DOMINIC JOHNSON, CEO, SOMERSET CAPITAL MANAGEMENT, SAYING: ''The tax arguments are actually hugely important in understanding the tempo and tone of any government that could be returned, and ultimately business people want one thing above all things, and that's consistency and an element of certainty.'' And while personal style shouldn't, say purists, come into it, it has. Both main party leaders accused of lacklustre campaigning - the spotlight as much on those who could hold the balance in a possible coalition or alliance government. Chief among them the Scottish National Party. Investor thinking is split over the impact they could have on a parliament located in England. SOUNDBITE: CHARLES STANLEY CHIEF ECONOMIST, JEREMY BATSTONE-CARR, SAYING (English): ''They could potentially hold the whip hand and that would be negative in one respect insofar as it might encourage a Scottish agenda involving independence .... But in another sense it would remove the risk of a possible Brexit EU referendum, and that of course many global investors may regard as a bigger positive.'' Confused? So is much of the British electorate. Opinion polls have consistently put the two main parties neck and neck. And with less than a week to go until polling day on May 7th, that shows little sign of changing.

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UK vote baffles voters, investors too

Thursday, April 30, 2015 - 02:46