Businesses are concerned about what will happen if no party secures a working parliamentary majority in the general election next month, it has been claimed.
According to the latest monthly survey by the British Chambers of Commerce (BCC), two-thirds of businesses said they were either concerned or very concerned about the prospect of a hung parliament. Just 13% of the 300 businesses questioned thought it would be good for business.
The BCC said the results reflect growing unease among both businesses and investors about what a hung parliament could mean for decision-making. Last week, leading investment funds told the FT that a lack of decisive action on how to reduce the public deficit could jeopardise the UK's economic recovery.
David Frost, director general of the British Chambers of Commerce (BCC) said businesses were right to be wary about the prospect of a coalition government.
Frost said: “Instinctively, companies prefer a clear mandate to lead and govern.”
“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.”
Aside from the planned increase in National Insurance contributions (NICs) in 2011, the majority of businesses believe that VAT is the tax most likely to be raised after the election, while the increase in NI was named as the most damaging.
Just 6% think a rise in NICs would be the least damaging tax hike, compared to 36% who think a rise in VAT would be the easiest to bear.
“These results provide further evidence that the employer National Insurance rise, planned for 2011, should be abolished in full,” added Frost.
“Considering companies have already said that VAT would be less damaging to their operation than a hike in NICs, it seems obvious that the tax on jobs should be scrapped and replaced by a less harmful tax on consumption.”
© Crimson Business Ltd. 2010