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8 May 2015
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Rocky road ahead

The UK General Election may not have produced the stability investors would have hoped for – even with a Conservative majority

Perhaps we should have seen it coming. With all the polls suggesting it was ‘too close to call’ and many members of the electorate still yet to make their mind up before election day itself, it appears that large numbers decided to stick with what they know rather than look for change.

Even in Scotland, it seems people chose the party that is currently in power in the Scottish Parliament rather than give their votes to Labour or the Liberal Democrats.

But while a Conservative majority might initially suggest the electorate has chosen stability over what Prime Minister David Cameron feared would be a ‘coalition of chaos’, the path ahead over the coming five years is likely to be as rocky as ever for the infrastructure market. Indeed, in the first hours after it became clear that the Tories would gain a majority, one financial consultancy was urging investors to look overseas. “Now is the time to think more globally,” came the message from Nigel Green, founder and chief executive of the deVere Group, arguing that Cameron’s victory is merely the calm before the storm.

And you can see his point. Labour’s big plan for infrastructure was the creation of an Infrastructure Commission that could provide a long-term view of the country’s needs, how to plan for them and how to prioritise what to spend money on. Shadow infrastructure minister Lord Adonis has always said that he hoped such a concept would gain cross-party support and be created whoever won the election.

But the Conservatives have never clearly thrown their weight behind the idea and any attempt from Labour to push this through now will be from a position of weakness – especially given that they will have barely any Liberal Democrats in Parliament to help them.

On a more positive note, the Conservative majority could be good news for private finance in infrastructure. Few expect the Tories to launch into a new round of social infrastructure investment. But where they do look to invest, there is likely to be a greater appetite to use private finance than was possible in coalition, where the LibDems were more strongly opposed to the use of the PF2 model.

Furthermore, the rise of the Scottish National Party (SNP) may help drive forward its agenda for infrastructure investment, where it has used its non-profit distributing model to significant success over the past few years.

Scotland, though, is likely to prove the first point of uncertainty of the next Parliament. The Scottish Parliament elections take place next year, and with all but three of Scotland’s Westminster seats now occupied by SNP members, it seems likely the party will again do well – once again raising the prospect of another vote on independence.

The Scottish elections will then most likely be followed the next year by a referendum on the UK’s future relationship with the European Union. Cameron pledged an in/out vote as part of his campaign for a new Tory government and given the strong polling of UKIP (even if the party only actually got one seat and failed to elect leader Nigel Farage), it would be almost impossible for the prime minister to go back on that pledge.

Investors, then, may well be looking at the UK’s new political map and wondering how rocky the road ahead could be.

Plenty of people had hoped that a single party majority government would increase stability across the country. But in fact, the way the political map is now coloured suggests that may not be the case after all.

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The UK General Election may not have produced the stability investors would have hoped for – even with a Conservative majority

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