News Analysis: Britain's election result good for economic growth

The British Conservative Party won the 2015 general election with 331 seats of the House of Commons on Friday, giving them a slender majority. Some economic experts and research institutions said the result of the election was good for the country's economy as it avoided a messy coalition.

GOOD ECONOMY PROSPECT

"The UK general election result is a surprisingly market-friendly outcome and removes the risk that the economy suffers a prolonged period of political uncertainty," said Vicky Redwood, the chief Britain economist of Capital Economic.

Bolstered by the election result, FTSE 100 Index, British benchmark stock market gauge, Friday increased sharply by 2.32 percent, or 159.87 points, to 7,046.82 points.

"The UK's fundamentals otherwise look pretty good. Overall, then, we remain pretty optimistic about the economic outlook," Redwood added.

Kathrin Muehlbronner, Vice President-Senior Credit Officer of Moody's, was also bullish about the British economy.

"The outlook for the country's public finances has improved irrespective of the government's composition: following several years of very subdued real GDP growth, growth accelerated significantly in 2014," said Muehlbronner.

"We expect the economy to continue to expand at rates above 2 percent for the next several years, as the effects of the financial crisis fade," said Muehlbronner.

UNCERTAINTIES REMAIN

Although many experts and the financial market welcomed the election outcome, uncertainties still exist.

David Cameron, British prime minister and leader of the Conservative Party, confirmed his promise to launch an in-out European Union (EU) referendum.

Muehlbronner said if the Conservative Party's plan to hold a referendum on EU membership results in Britain's exit, this could have consequences for the whole economy, including potentially for the sovereign rating.

Professor Patrick Dunleavy in London School of Economics and Political Science, told Xinhua on Thursday that the referendum on EU membership may hold early if Cameron secure his second term as prime minister.

"I think it might hold in next year, and foreign investment in Britain could suffer from uncertainty," said Dunleavy.

Besides, the success of the Scottish National Party (SNP) suggests that the topic of Scottish independence could also come back onto the agenda, added Redwood.

SNP on Friday won by a historic landslide of 56 seats out of 59 seats for Scotland in the British general election.

Some analysts noted the rising SNP would strengthen Scottish's demands for independence, and that might affect Britain's future.

AGGRESSIVE FISCAL SQUEEZE

Experts also said a Conservatives victory means that the economy will have to endure a fairly aggressive renewal of the fiscal squeeze.

"The gilt market will clearly be reassured by the Conservatives' plans to eliminate the rest of the budget deficit," said Redwood.

The Conservatives have pledged to eliminate the structural current budget deficit by 2017/2018 and then to go on to achieve a surplus on the overall budget in 2018/2019.

However, the party may find cutting spending as much as they want hard to do anyway, Redwood pointed out.

"Even if the cuts are achieved, at least interest rates will stay lower for longer to help compensate. And having shown considerable flexibility with their fiscal plans in the last parliament, the Tories would presumably soften the squeeze if the economy began to suffer," said Redwood. Endit