Businesses face concerns over a hung parliament

May 7, 2010

- Paddy Earnshaw is customer director at Travelex business payments. The opinions expressed are his own.-

The fears of many British businesses were confirmed today after the first hung parliament in three decades was declared on Friday.

Despite the contrasting political outlook of most employers, all of them will have wanted a decisive majority, in order to ensure our economic stability.

Many companies have expressed their concerns that a hung parliament would damage their business. When we conducted a poll amongst our business clients this morning, we found that 48 percent of the businesses interviewed thought a hung parliament would have a negative impact on their business, with most blaming the resulting weak pound.

On bank lending, 38 percent thought the Conservatives would be best at encouraging banks to lend to businesses and only 5 percent trusted Labour to get the banks lending more freely again.

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.

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

Political uncertainty has traditionally haunted all major currencies. Until the political outlook becomes clearer it is likely the pound will continue its downward trend.

Although exporters will have enjoyed sterling’s depreciation, over the next week most British businesses will be looking for decisive action from the main political parties to come up with a credible deficit plan to stall sterling’s slide.

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