The UK faces its most uncertain election in a generation. Who will rule Britannia—and what are the implications for UK fiscal policy and asset prices?

We gathered our foremost UK experts to debate the topic ahead of the May 7 poll. The resulting 12-page publication includes:

A deep dive on the new UK government's biggest policy challenge—reining in its bulging budget deficit.
Our analysis of the election's implications for UK fiscal and monetary policy, as well as the potential impact on equities and gilts.


  • Opinion polls and betting sites point to a weak coalition government: a Labour-led coalition with informal support from the Scottish National Party (SNP) or a repeat of the current alliance between Conservatives and Liberal Democrats.
  • A loss of support for the establishment parties, the peculiarities of the UK’s "first-past-the-post" district system and the rarity of political coalitions mean it could take several weeks or more to establish a new government.
  • A soothing outcome for markets looks unlikely. Labour would be tough on business—and may be seen as lacking fiscal credibility. A Conservatives win would bring an unsettling referendum on the UK’s European Union membership.
  • UK markets have been relatively calm, suggesting a smooth and swift government handover. We believe this view is too complacent—and expect volatility in the currency and other UK assets.
  • The main financial challenge for any new government will be cutting the budget deficit. The major parties mostly agree on the direction of adjustment but disagree on how to get there.
  • Backtracking on the pace of deficit reduction would likely lead to a temporary sell-off in gilts and steepen the yield curve. It could also result in a rise in inflation expectations and bring forward the timing of interest rate hikes.
  • UK equities and corporate credits could perform poorly because new governments tend to front-load austerity measures, denting consumer confidence. A Labour win would likely hurt regulated industries such as banks and utilities.
Joe Di Censo, Luke Chappell, Ewen Cameron Watt

Joe Di Censo, Luke Chappell, Ewen Cameron Watt

Arno Kitts, Paul Bucksey, Tony Stenning

Arno Kitts, Paul Bucksey, Tony Stenning

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