Britain votes in a cliffhanger

Hung parliament predicted; Labour retains chance of staying in power

With the result too close to call, Prime Minister Gordon Brown’s ruling Labour Party retains a chance of staying in power, perhaps in coalition with the centrist Liberal Democrats.

Whoever wins will have to deal with a record budget deficit running in excess of 11 per cent of national output, and demands for political reform following a parliamentary expenses scandal last year which left Britons disgusted with lawmakers.

“This election has been more exciting, more than I expected,” said lawyer Lorraine Mullins, voting at a busy polling station in central London.

The centre-right Conservatives, led by former public relations executive David Cameron, have seen a commanding poll lead dwindle since the turn of the year, with voters seemingly reluctant to embrace the change they say they offer after 13 years of Labour rule.

Political paralysis

Markets want a clear-cut result and fear that a stalemate could lead to political paralysis, hampering efforts to tackle the nation’s spiralling debt and secure recovery from the worst recession since World War Two.

The equation has been made more complex by a surge in support for the Lib Dems, energised by strong performances in TV debates by leader Nick Clegg, who shares Cameron’s relative youth — they are both 43 — and easy manner.

After weeks of frenzied campaigning, the three main party leaders cast their votes early, smiling and waving to the gathered ranks of media.

The likeliest outcome is a hung parliament in which no party wins an outright majority in the 650-seat house. Britain has not had an inconclusive election since 1974 and does not have a tradition of coalition-building like its neighbours in continental Europe.

Sterling hit a near nine-month high on Wednesday against a euro weakened by the crisis in Greece. However, analysts say the markets could turn their fire on British assets should efforts to form a government prove protracted and messy.

Brown and out?

Brown’s Labour party has shown some improvement in the latest polls and the quirks of the British parliamentary system mean it could finish third in terms of vote share and still remain the largest bloc in parliament.

That scenario could leave the Lib Dems holding the balance of power and certain to press their case for electoral reform to a more proportional system. Other minor parties could also find themselves playing a significant role.

Clegg has said he would find it hard to do a deal with Brown if Labour does finish third, but has not ruled out working with an alternative Labour leader, or with the Conservatives.

The Lib Dems share Labour’s concern that spending cuts should not be imposed until economic recovery is established and Labour are more open to electoral reform than the Conservatives.