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Hung Parliament in UK leads to question marks over future direction of financial regulation

Wednesday 12 May 2010 - by John Rowland

David Cameron’s centre-right Conservatives fell 20 short of the 326 seats they required to form a majority Government on 6 May, leading to the first hung parliament in the UK since 1974 and considerable uncertainty about the future direction of financial regulation.

Against a backdrop of turmoil in global financial markets caused by fears of a collapse of the euro, David Cameron announced that he would enter negotiations with the third-placed Liberal Democrats in order to form a stable Government.

Cameron said: “We are facing a financial and economic situation of great seriousness as a result of our dangerous debts and our deficit. We need a Government that reassures the international markets.”

With Clegg’s reportedly poor relationship with the then UK Prime Minister Gordon Brown appearing to be a barrier to a deal with Labour despite the political affinity between the parties, negotiators from the Conservatives and Liberal Democrats met over the 8-9 May weekend.

Echoing Mr Cameron’s concern about public finances, Liberal Democrat spokesman Danny Alexander said that any deal between the parties would put deficit reduction and economic stability at its heart, while senior Conservative William Hague added that banking reform was also being discussed.



However, in a move that surprised many, Labour leader Gordon Brown said that he would resign, opening the way for formal talks between Labour and Liberal Democrats. He said: “There is a progressive majority in Britain and I believe it could be in the interests of the whole country to form a progressive coalition Government.” But the talks collapsed and Brown resigned as Prime Minister shortly after.

Cameron is now in Number 10 Downing Street, having announced the formation of a coalition Government with the Liberal Democrats which gives them several Cabinet positions.

Putting to one side the macro-economic and fiscal challenges facing the new Government, the outcome of negotiations could have a considerable impact on the UK financial sector. Despite broad similarities on some areas such as bankers’ remuneration and the imposition of a levy on the financial sector, the parties have different policies on financial reform.


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