UK political gridlock: Good for business?
With a coalition government looking highly likely after the U.K.'s general election Thursday, an alliance of diverse political parties in one government might not be as bad for the business world as people think.
A day before the election, opinion polls indicate that the incumbent Prime Minister David Cameron, head of the Conservative party, is neck and neck in the polls with opposition Labour leader Ed Miliband.
If neither party gains a majority of the 650 seats up for grabs, a "hung parliament" occurs, prompting fraught negotiations as the parties try to establish alliances to work together in government.
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But an unusual alliance might not be a bad thing, according to one top political analyst.
"Maybe a hung parliament with no strong majority for any party is not, necessarily, so bad for business because it reins in the more extreme impulses of either party and provides the gridlock that Wall Street likes to see," Tina Fordham, chief global political analyst at Citi, told CNBC Wednesday.
"What is really fascinating about this election and the way the polls are playing out is that nothing has moved the needle in terms of support for the parties. Not the debates, not the campaigns, not the manifestos," she said, adding that this was due to the parties narrowing their policies.
In 2010, the Conservative party formed something of an awkward alliance with the Liberal Democrats and although all the main parties have campaigned to gain a majority of seats, behind the scenes the parties are having to prepare to broker deals with each other over policy and potential alliances.
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Parties that could be "kingmakers" following the election include the Liberal Democrats, U.K. independence Party (UKIP) and the Scottish National Party (SNP), as well as other smaller parties that could lend their support to an alliance.
Despite Fordham's optimism about the potential benefits of a coalition government, some U.K. business leaders are worried about the prospect of a win (or coalition led by) Labour - a party seen as less pro-business than the Conservatives. A variety of business leaders have hit out at the party, saying that its plans to raise corporate tax rates could be detrimental to business growth in the country.
But John Longworth, director general of the British Chambers of Commerce (BCC), told CNBC Wednesday that neither party was clear on the issue.
"None of the parties have laid out a clear and cogent plan for economic growth," he told CNBC Europe's "Squawk Box" Wednesday.
Longworth echoed Fordham's sanguine attitude towards coalition governments - which often require compromise and a balancing of divergent political attitudes - saying that any alliance that engendered less interference from government into the business world would be positive for industry.
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"We shouldn't fear, necessarily, the government not doing too much in a minority government scenario - for example, the American system (of governance) is designed to stop governments doing much domestically and they do pretty well," he said.
"The fact that the government isn't introducing legislation isn't a disaster for business. Business carries on as normal and actually, if we don't have a government that's intervening very much in the market, (that's) fantastic."
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt.
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