Economists at Deutsche Bank said yesterday that the UK is on track for a coalition between Labour and the SNP following May’s election – but warned that the British economy would do better in the long term under a deficit-cutting Tory government.
The report says: “If the general election were to be held now Labour would probably be the largest party”, but would probably not have a majority, and so may well form a centre-left coalition with the Scottish National Party.
While the report warns that too much fiscal tightening could stifle short term growth, it concludes Tory proposals for “austerity will be good for growth in the longer-term”, while some Labour policies, “could damage perceptions of the UK to overseas investors”.
The authors of the report considered much of the current polling when making their predictions, and believe that both the Liberal Democrats and Conservatives could do better in May than is currently predicted.
It’s not all good news for the Tories though, as the Deutsche Bank experts also conclude that the promise of an EU referendum, a key Cameron policy, creates uncertainty for business.