With no clear majority after the UK election, in essence a “hung parliament”, the country awaits the outcome of discussions between the main political parties on how a coalition government could optimise a strategy that would some positive impact on the economy.
The Bank of England also has held the UK base rate at 0.5% in May and decided not to pump any more money into the economy through quantitative easing. The British Chambers of Commerce and Institute of Directors both agree that with the fragile situation rates should not be raised. Inflation is over 3% for April and the last quarter’s initial growth estimates at 0.2%, half the final quarter of 2009 indicating another potential slow down in the economy.
All this pales into insignificance with the events surrounding the Greek debt crisis, and to a lesser extent the problems in Spain and Portugal, as the global markets declined rapidly last week when it appeared that Greece “had finally gone bust”. The reaction on Monday to a European Central Bank initiative for a three year stability package to support the Euro, thus stemming the decline of Eurozone countries, provided an initial 5% increase in share prices. The “see saw” antics of stock markets caused by over eager market makers shows that as a global institution, we are being influenced by a lot of uncertainty of what the future holds and when, or if, stability will return in due course.
Whatever the situation in the UK, now and in future months, it is the global macroeconomic movements that are going to influence a recovery or “double dip” recession in individual national economies, but the consumer and business will have to deal with fallout for some years to come.
The final canvassing surrounding the UK election takes place today; after three television debates, the unfortunate comments by Gordon Brown and the tactical voting issue, the main political parties realise that a “hung parliament” could be the outcome on Friday morning. The electorate knows that the UK is in financial trouble and that no matter who they vote for there will be public spending cuts, tax increases and possibly benefit reductions. Although some voters have a lifelong allegiance with one party this time around there is no guarantee, but many voters look at the headline policies and think “how will they impact me” and not “what is best for the country”. It is hoped that the turnout will be higher this time with an increase in younger voters but whatever the outcome, there is a long hard climb back for the UK to get out of the national debt hole. Is there an 0800 number we can call?
The best news in the last week for the political parties in the run up to the UK election has been the Icelandic ash cloud that has engulfed most of Northern Europe over the last few days. Apart from causing travel chaos to thousands of people and costing the travel and ancillary industries millions in lost revenues, there have been enormous “green savings” due to reduced carbon emissions.
The Liberal Democrats have benefited the most as the opinion polls seem to show they possibly have potentially a bigger influence in the next Government than expected by the Conservatives or Labour, following the first live UK election television debate. However, the big issues still remain and also the uncertainty of how anyone in power will tackle them, especially as many of these will not be resolved during the next five years.
Whatever the outcome of the election, hung parliament or a majority winner, addressing UK debt, public sector spending cuts, tax increases, health, education, decline of sterling, interest rates and inflation indicates a slow recovery plan over a number of years to bring prosperity back to businesses and consumers.