Local Strengths May Surprise Pundits In UK Election

There is no better way of trying to gauge what is happening in an election than knocking on some doors and speaking to voters. I spent the bank holiday weekend doing just that...

There is no better way of trying to gauge what is happening in an election than knocking on some doors and speaking to voters. I spent the bank holiday weekend doing just that.

My first stop was a constituency just outside Manchester. Many of those I spoke to were looking to vote tactically. That is one of the downsides of the first past the post system. If you are a life-long supporter of a party which has a small share of the vote in a particular constituency, then it could be argued that your vote would be wasted if you voted for that party and it is better to focus on the parties that have a chance of winning.

The same was apparent when I travelled up to Scotland. The wave of enthusiasm for the SNP that has engulfed the country post the referendum is frightening many of those who voted to stay part of the UK in last year's referendum, who formed the majority. Again, many told me that they intended to vote tactically to keep the SNP out.

The Lib-Dems may retain more seays than their national declime may suggest

But what would be the best outcome for the UK economy and the markets? The markets don't like change and so another Conservative/Liberal Democrat coalition would be welcomed. This seems increasingly likely in my view, as the Liberal Democrats may well benefit from a change in the first-past-the-post system. It is likely that their share of the national vote will fall sharply but that they will retain far more seats than that decline might suggest, because of their exceptional strength at local level in specific areas of the country.

Osborne and Alexander failed to achieve one of their main goals

It may seem strange that this would be seen as the best outcome, given that George Osborne and Danny Alexander did not actually achieve one of their principal aims when coming into government in 2010. The budget deficit has remained stubbornly high. The UK initially suffered under an austerity cloud, but the impact that this had on the deficit was muted. Somehow, they managed to keep faith with the markets and the cost of the government's borrowing remained low. This was quite a feat and something that they may not be able to repeat.

The financial services sector cannot maintain recovery on its own

This time around, the economy is in better shape and tax revenues have been rising, but recent economic statistics suggest that the recovery remains fragile. The construction and manufacturing sectors are suffering. The former because of the uncertainty caused by the election and delays to larger projects as a result and the latter because of the strength of sterling against the euro. As ever, the UK has to rely on the massive services sector, but this cannot maintain the momentum on its own.

In order to ensure that recovery continues, we need to see a recovery in construction activity at the larger end - and we need manufacturers to become more competitive. The lack of improvement in productivity over the last eight years since the start of the financial crisis has been one of the main features of the UK economy and this needs to be fixed. The solution is for companies to invest and they need funds in order to do this.

There has been a recovery in bank lending to the corporate sector in recent months, which is welcome and indicates that companies are beginning to invest, but a far greater commitment is needed in order to avoid a faltering of our recovery, whatever the outcome of the election.

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