It is official, the UK is facing its first hung parliament in 36 years, and unless you have been living in a cave, or indeed and airport for the last few days, you would have heard all about it.
The Conservatives failed to gain a majority in the current first past the post system on Thursday, falling short of an overall majority by 20 seats. This left an array of possible solutions – the favourites being leaving the Tories to govern with a minority government, or to form a coalition government with smaller parties.
The leader of the Liberal Democrats, Nick Clegg, is currently holding talks with Conservative leader David Cameron along with representatives from each party holding further talks about the possibility of a Conservative/Lib Dem coalition. The sticking point for the Lib Dems is currently electoral reform and the state of the economy and discussions have been carried out at the weekend to discuss whether the two parties can work together over these points.
If talks fail then we could possibly see the Liberals hold talks with Labour and other smaller parties such as the SNP to discuss a coalition with them. Prime minister Gordon Brown has already offered Nick Clegg a definite on electoral reform, something that David Cameron has been vague on. However, it would appear, and has been reported, that any deal with Labour will be more successful without Gordon Brown. Moreover, it has been suggested by Labour MPs that the PM should stand down.
Talks over the weekend have had the aim of being positive and to boost the markets and sterling today. The Greek financial crisis has been another major global pressure point and mixed with uncertainty in UK politics, sent the FTSE as much as 3.5% lower on Friday, barely keeping above the 5,000 mark.
Although eurozone rescue talks and a bailout plan agreed yesterday have boosted world equity markets, they have still mainly erased gains made so far in 2010. A government cannot be formed over the weekend, but it is important that all parties involved are seen to be making progress as uncertainty in all markets will continue.
Matthew Sinclair is the director of Saint Property which provides professional knowledge of markets worldwide for international buyers, specialising in Scottish property. He believes that at the moment the only certainty is uncertainty.
“This does not help any market, least of all property. The equity markets are unpredictable, especially with recent events regarding Greece, Spain and Portugal, and the state of these markets has a direct effect on the property market. Certainty and a strong government are required to stabilise the property market and allow it to move forward with confidence. We hope to see this happen very soon.”
Although progress has been seen to be made over the weekend, and European finance ministers have agreed a eurozone bailout deal which has sent the FTSE 4% higher, if negotiations are stretched out over the week, this initial boost in the markets could begin to wane.
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