It is an opportunity missed for the UK and our economic problems. My greatest worry is we will eventually see an increased number of spending cuts and greater tax rises.
(PRWEB) May 9, 2010
British sterling and shares have been hit after the closest fought election in modern times has resulted in a hung parliament, which could worsen the UK economy, suggests Moneystand.co.uk.
As the votes were being counted through the night, the pound fell by four cents to a 12-month low of $1.471 and shares fell 1.7% as Britain’s first hung parliament since 1974 increased fears that any incoming government not be able to handle the budget deficit, which was running at more than 11% of GDP.
Against the euro the pound also lost two cents to trade at €1.154.
The slightly more positive outcome from the election is the price of gilts – safe bonds which are issued by the government – have fell only slightly, and not as deep as analysts predicted in the event of no party gaining the majority.
The current shape of the new government is uncertain, a Labour and LibDems together will not be able to amass a parliamentary majority. Even if a coalition between the two parties was formed they would have to strike an agreement with smaller parties such as Northern Ireland’s DUP and the Scottish Nationalists.
Matt Spencer, founder of personal finance blog Moneystand.co.uk has said, “What many have predicted for quite some time now has eventually happened, and the pound is suffering badly. The pound is drowning at sea at the moment, with Cameron, Brown and Clegg stuttering ashore. If a lifejacket isn’t thrown in over the weekend, Monday morning should be renamed Monday mourning.”
With no party with a clear mandate to tackle the problem of national debt, it is feared that time is running out to find a solution, and even if one is found, the level of debt could be significantly worse.
“It is an opportunity missed (referring to the election) for the UK and our economic problems. My greatest worry is we will eventually see an increased number of spending cuts and greater tax rises.”
Matt Spencer also fears for the homeowner; as it could mean higher borrowing costs; “The political instability which we will see over the forthcoming days and weeks, I am sure will spark loss of investor confidence in the UK economy. This will have a knock on effect with wholesale money markets eventually resulting in an increase in cost to lenders of funding new mortgage lending.”
Personal finance blog MoneyStand provides unbiased personal finance, IVA and debt related information. Founded in 2008, MoneyStand was created in response to the worsening financial situation of individuals in the UK and across the world. For more information on personal finance, visit http://www.moneystand.co.uk.