The next General Election in the UK is scheduled for 7 May 2015, and the outcome is far from certain.  Where the power lies will influence the business environment for long after May 2015, particularly if no one party secures an outright majority in Parliament or if the result leads to a referendum on whether the UK should leave the EU.

The opposition Labour party has a slim lead, in the latest polls (Labour were 0.10 points clear in September 2012).  However, their leader, Ed Miliband is not popular and struggles to connect with voters (his personal ratings recently hit a 33-month low).  David Cameron also suffers from low personal ratings (when asked which main party leader they trusted the most, 40% of the respondents said “none of the above”, 22% said Cameron and 16% Miliband).  Although Cameron leads Miliband on economic trust, voters consistently rate the NHS as a key consideration in deciding how to vote, favouring the Labour party, which is considered stronger on this issue.

There is increasing sentiment that the next General Election will result in a hung Parliament, with no party having an overall majority in the House of Commons.  In this scenario, the largest party cannot pass laws without the support of MPs from other parties.  That support may come in the form of a formal coalition, like the Con-Lib Dem coalition which has governed since the 2010 election, or the governing party may have to negotiate with other parties to get specific laws passed on an ad-hoc basis.  It presently seems unlikely that the Liberal Democrats will retain the keys to power, mainly due to their unpopularity but also due to the rise of the UK Independence Party.

UKIP campaigns on lowering immigration and Britain’s exit from the EU.  They recently secured their first elected MP, and are polling in the high teens.  On account of the UK’s first-past-the-post voting system, these ratings might translate into a relatively low number of MPs after the next election (a figure around 30 seats could be realistic), but this result could put UKIP into coalition government if neither the Conservatives nor Labour secure an outright majority.  UKIP’s support reached an all-time high after the recent demand from the EU that the UK pay a surcharge of €2.1 billion into the EU Treasury, handing UKIP further political capital.

The rise of UKIP gives, or perhaps reflects, increasing attention to the UK’s relationship with the EU.  Should the balance of power rest with UKIP after the General Election, then a formal or informal deal with them is likely to force an in/out referendum (Cameron has in any event promised a referendum by 2017).  Having said this, support for the UK staying within the EU was recently at a 23-year high (56% of Britons would vote to stay in the EU) and a British exit remains unlikely.

With all of this, it should be remembered that polls are snapshots, not predictions.  But, as matters presently stand, the next General Election looks too close to call, and that another coalition, with attendant business uncertainty, cannot be ruled out.