With this week’s election looking increasingly destined to create a hung Parliament, British businesses are becoming worried about the potential impact to the economy and their revenue streams, research by the British Chambers of Commerce (BCC) has found.
According to the BCC, 65% of firms were either “concerned” or “very concerned” about the prospects of a shared government. While some 13% of those surveyed felt a hung Parliament could be “a good thing”, the BCC was keen to stress the dangers that may arise.
"Instinctively, companies prefer a clear mandate to lead and govern,” claimed David Frost, BCC Director-General. "With our economy still fragile and the public finances in a dire state, the overwhelming concern is whether a hung Parliament will provide decisive action around the UK's unsustainable deficit.”
"Whatever the outcome of the election, whether we have a coalition government or not, we must see a credible plan to reduce the deficit and restore confidence within 90 days."
While all three political parties have been largely selective when asked to reveal the extent of public sector cuts needed to address the country’s escalating deficit, the majority of those surveyed felt that VAT increases will be an inevitable factor in the coming months.
When asked what taxes were likely to rise, 54% of respondents said VAT would be put up, 13% excise duties and 12% income tax.
"Most businesses expect VAT to increase after an election to help plug the hole in our public finances,” added Mr Frost. “Considering companies have already said that VAT would be less damaging to their operation than a hike in national insurance contributions, it seems obvious that the tax on jobs should be scrapped and replaced by a less harmful tax on consumption."
Under a hung Parliament, no one political party can claim overall majority of MPs in the House of Commons. Therefore, for laws to be passed, all parties would need to give their support, potentially fracturing and delaying the decision making process.
If no party is willing to form a coalition government, whereby two parties within a hung Parliament join forces to create a majority, another election will quickly follow and may prove just as inconclusive.
Traditionally, the economy has suffered under hung parliaments, with the most recent in 1974 coincidentally coming amidst huge public debt and large-scale strike action.
All will be revealed on Friday!