UK plc: Outlook gloomy under hung parliament

Category: Business
Date: 5/7/2010

Almost half of UK businesses think that a hung parliament will have a negative impact on their firm's fortunes.

A first hung parliament in three decades was confirmed this morning, a result that sent the pound into freefall, registering a 12 month low against the dollar and a three month low against the euro.

Both David Cameron and Gordon Brown have registered their intention to talk to the Liberal Democrats with a view to forming a collation government, although nothing has yet been confirmed.

And with uncertainly at such high levels, 48% of UK firms said a hung parliament would be bad for business, with most citing the weak pound as their main concern, research conducted by Travelex has revealed.

Access to credit has long been a concern for UK business, and almost four in ten (38%) companies said they thought the Conservative Party would be the best at encouraging banks to lend to businesses.

Just 5% said they trusted Labour to get banks lending more freely.

"Most of our business customers are concerned about the impact a hung parliament is having on the pound and unfortunately we expect it to remain weak for the foreseeable future," Paddy Earnshaw, customer director at Travelex Global Business Payments said.

"Worryingly, a hung parliament may also affect their ability to obtain credit for their business. If the markets do not see the deficit being addressed quickly and effectively, the UK's credit rating will come under pressure.

"If our credit rating is downgraded it will put the cost of borrowing up for UK businesses and could even tip us back into recession."

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