With the possibility that election results might push the world’s fifth largest economy a step closer to leaving the European Union, investors are wary over United Kingdom shares and the country’s currency, the pound.
The FTSE fell to one-month lows on Thursday, with what is set to be one of the UK’s closest national elections in decades taking place today. After hitting a record high of 7,122.74 points last month, the blue-chip index was down 1.4 percent at 6,834.69, marking its lowest level since the beginning of April. The FTSE gained around 4 percent since the beginning of 2015.
The election uncertainty has had an even greater impact on the British pound than the stock exchange. The currency fell about 5 percent against the dollar to $1,5202. So far, the pound has been supported by the ongoing economic recovery and low interest rates.
Election polls signal a tie between Prime Minister David Cameron’s right-wing Conservatives and the opposition left-wing Labour party. The Scottish National Party might emerge as the third biggest party, as well.
Another issue bothering investors and creating uncertainty is a potential “Brexit” referendum, an election promise made by the Conservatives to hold a referendum on Britain’s membership of the European Union by the end of 2017 if they win the election.
According to two respected German institutions, Bertelsmann Stiftung and ifo, a British exit from the EU could cost the UK as much as €300 billion, knocking 14 percent off its gross domestic product.
Polls suggest no single party will be able to win an overall majority, making a coalition government the most likely result.