By Lois Avery
Election fever is beginning to sweep Britain as the main parties unleash their manifesto promises just 3 weeks before the polling stations open.
And with the state of the economy at the forefront of their policy pledges it seems that the electorate may be voting with their cash in an effort to protect investments in stocks, pension funds and savings.
But what effect will the election have on investors, whatever the outcome?
Hung Parliament?
The prospect of a hung parliament has left investors panicking about the effect political deadlock will have on the stock market and sterling - the last time Britain saw a hung Parliament, in February 1974, the market fell 18 per cent in the run up to the election and 8 per cent the year after.
According to Ted Scott, director of UK strategy at F&C Investments, a hung Parliament would be the worst outcome and would be detrimental to both the equity and gilt markets. He added that this is because markets hate uncertainty and if neither party had a workable majority there could be a further hiatus in policy decision making.
A study from the Centre for Policy Studies shows that stock markets have performed better under the Conservatives, with equity shares performing badly in Labour governments since the second world war.
A Conservative majority could be treated positively with investors seeking a radical change to aid Britain's recovery programme. David Cameron yesterday said that the Tories would 'start earlier' and 'go faster and further than Labour' in an effort to bring about a recovery promising another £12bn of public spending cuts.
However, the Daily Telegraph has reported that 50 economists have signed a letter backing Gordon Brown's economic policies, claiming that Tory cuts could lead to job losses and a slide back into recession.
Economic uncertainty
Interest base rates are not expected to rise much above the 2 per cent mark for until at least 2011, and look certain to remain at an all time low of 0.5 per cent for the rest of 2010. This means savers are starting to look at where they can get the best return on their investments, and how an election might affect this.
Consumer confidence has also taken a hit in the run up to the election according to research from Nationwide which suggested that people will be unsure as to whether they will be better or worse off in the coming months and concerns about the state of the economy and employment could still be playing on the minds of consumers.
Banking reform
Another key election issue is widespread banking reform. Voters are disillusioned with the system following anger about the banking bonus culture and the main parties are keen to be seen to rein the banks in.
According to Citywire Liberal Democrat leader Nick Clegg said his party would ban bonuses for loss-making banks, while the Conservatives favour a unilateral bank levy. Gordon Brown said he intends to ensure the taxpayer a good return on their investment in the banks, which were bailed out using public money.
Regradless of the result on May 6 it seems that Brown, Cameron and Clegg are all agreed on one point; viable plans for reducing Britain's £167billion deficit must be at the forefront of their policies in order to get the your attention, never mind votes.
For more financial news visit Fair Investment Company
http://www.fairinvestment.co.uk/
And with the state of the economy at the forefront of their policy pledges it seems that the electorate may be voting with their cash in an effort to protect investments in stocks, pension funds and savings.
But what effect will the election have on investors, whatever the outcome?
Hung Parliament?
The prospect of a hung parliament has left investors panicking about the effect political deadlock will have on the stock market and sterling - the last time Britain saw a hung Parliament, in February 1974, the market fell 18 per cent in the run up to the election and 8 per cent the year after.
According to Ted Scott, director of UK strategy at F&C Investments, a hung Parliament would be the worst outcome and would be detrimental to both the equity and gilt markets. He added that this is because markets hate uncertainty and if neither party had a workable majority there could be a further hiatus in policy decision making.
A study from the Centre for Policy Studies shows that stock markets have performed better under the Conservatives, with equity shares performing badly in Labour governments since the second world war.
A Conservative majority could be treated positively with investors seeking a radical change to aid Britain's recovery programme. David Cameron yesterday said that the Tories would 'start earlier' and 'go faster and further than Labour' in an effort to bring about a recovery promising another £12bn of public spending cuts.
However, the Daily Telegraph has reported that 50 economists have signed a letter backing Gordon Brown's economic policies, claiming that Tory cuts could lead to job losses and a slide back into recession.
Economic uncertainty
Interest base rates are not expected to rise much above the 2 per cent mark for until at least 2011, and look certain to remain at an all time low of 0.5 per cent for the rest of 2010. This means savers are starting to look at where they can get the best return on their investments, and how an election might affect this.
Consumer confidence has also taken a hit in the run up to the election according to research from Nationwide which suggested that people will be unsure as to whether they will be better or worse off in the coming months and concerns about the state of the economy and employment could still be playing on the minds of consumers.
Banking reform
Another key election issue is widespread banking reform. Voters are disillusioned with the system following anger about the banking bonus culture and the main parties are keen to be seen to rein the banks in.
According to Citywire Liberal Democrat leader Nick Clegg said his party would ban bonuses for loss-making banks, while the Conservatives favour a unilateral bank levy. Gordon Brown said he intends to ensure the taxpayer a good return on their investment in the banks, which were bailed out using public money.
Regradless of the result on May 6 it seems that Brown, Cameron and Clegg are all agreed on one point; viable plans for reducing Britain's £167billion deficit must be at the forefront of their policies in order to get the your attention, never mind votes.
For more financial news visit Fair Investment Company
http://www.fairinvestment.co.uk/
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