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Businesses concerned about inconclusive election

Source: Reuters - Mon 26th Apr 2010

Nearly two-thirds of British businesses are concerned about the potential impact of no party winning an outright majority in a May 6 parliamentary election, according to a British Chambers of Commerce survey on Monday.

Opinion polls indicate Britain is heading for a hung parliament, a rare outcome in British politics in which no party has overall control, prompting concern about political deadlock hampering efforts to cut a record budget deficit.

While some market participants have become more open to the idea, the BCC's business survey showed 65 percent of the 300 companies polled were either "concerned" or "very concerned" about the impact a hung parliament would have on their business.

"Businesses are right to be wary about the prospect of a hung parliament. Instinctively, companies prefer a clear mandate to lead and govern," said BCC Director General David Frost.

"With our economy still fragile and the public finances in a dire state, the overwhelming concern is whether a hung parliament will provide decisive action around the UK's unsustainable deficit."

This was the first time the BCC had included a question on the prospects of a hung parliament in their monthly survey, which aims to canvass businesses' views on topical matters.

The economy has become a key election battle ground, with the Labour party, in power for 13 years, arguing spending cuts to trim the budget deficit must be delayed until economic recovery is assured, while the opposition Conservatives want to start cutting sooner.

Asked which form of taxation, aside from planned increases such as to the National Insurance payroll tax, were most likely to rise after the election, 54 percent said the VAT sales tax, while 12 percent predicted a hike in income tax.

Last Friday, ratings agency Moody's said a hung parliament would not necessarily hurt Britain's triple-A rating as there is a broad political consensus on the need to cut the deficit.

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