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11 November 2014updated 09 Jun 2021 2:19pm

Amid increased uncertainty, Labour remains the favourite

The Labour party could still win a majority in 2015.

By Richard Mylles

One half of the governing Conservative-Liberal coalition heads into the general election in the midst of an acrimonious schism. Political grievances that have been bubbling under the surface of British politics for many years are seeing a party formed just 20 or so years ago appealing disproportionately to working-class men, vastly increasing its vote share – although thanks to the UK’s first-past-the-post electoral system it will only slightly increase its number of seats. In the meantime, an electoral breakthrough by secessionist nationalists is set to pave the way for their ultimate withdrawal from the UK.

This, as you may have guessed, is not a prediction for the events of 2015, but a description of the 1918 election – the similarities are striking. Back then, the party facing schism were the Liberals, the insurgents were the recently-formed Labour party, and the secession-minded nationalists Ireland’s Sinn Fein.

History doesn’t repeat itself of course, but it does rhyme. Today, as then, we find ourselves looking forward to an election where the old rules do not apply. Next May will likely see the two main parties, the Conservatives and Labour this time, taking the smallest share of the vote the electorate has awarded its two largest parties since that 1918 election. A secessionist Westminster breakthrough, this time by the SNP, is unlikely to set the stage for Scottish independence (as it did in 1918 for Ireland), but it could have a significant impact on the level of devolution that Scotland is awarded next year, particularly if the SNP holds the balance of power in a hung parliament. And Ukip does not, at this stage, look likely to repeat Labour’s feat of supplanting one of the two main parties of government, but it probably will – as Labour did until 1931 – make hung parliaments significantly more likely.

UK politics has seldom seemed more uncertain. The increasing popularity of the “non-traditional” Westminster parties, not just Ukip but the Greens and the SNP as well, has unpicked the fabric of the old Labour-Conservative duopoly. The latest Ashcroft poll puts the Conservatives’ projected share of the vote at 30 per cent and Labour’s at 29 per cent. To put that in context, the Conservatives managed 31 per cent when they were swept away by Tony Blair’s first Labour landslide in 1997. Labour’s 29 per cent, meanwhile, is equal to Gordon Brown’s abject performance in 2010. Neither party is winning, and yet, thanks to the first-past-the-post electoral system, it remains certain that one of them will form the dominant part of the next government.

More by accident than by design, both the Conservatives and Labour find themselves in with a good chance of taking that spot. Which will “win” and, indeed, what “winning” will actually mean remains unpredictable. With a small recovery in the polls, Labour could conceivably win a majority; electoral mathematics make it particularly difficult for the Conservatives to do so, though not impossible. As the polls continue to tighten however, a majority for either party is looking significantly less likely. So if we can’t predict with any confidence either the winning party or the manner of its victory, we are left with four possible scenarios.

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The least likely at this stage is a Conservative majority. The party would need to beat its 2010 performance vs Labour to achieve this, which, with Ukip’s rise and the collapse of the Lib Dems (at the Tories’ expense and to Labour’s benefit respectively) is a tough ask. If forced to formulate a probability I would rate the chances at around 10 per cent.

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A Labour majority is more likely; the party needs just a 3 per cent lead over the Conservatives, which it has had for much of the last two years. Ukip’s invasion of Tory-held marginals can be expected to swing an electorally significant number of seats Labour’s way. Labour’s recent performance however has fallen, while the increasingly popular Green party may potentially take votes disproportionately from Labour in much the same way Ukip has from the Conservatives. Combined with the deepening unpopularity of Labour’s leader Ed Miliband, these chances are lower than they were two months ago. I put them at 20 per cent.

A hung parliament is the most likely outcome in my view. Labour still holds the advantage in terms of who would be the biggest party. The latest poll putting the Conservatives 1 per cent ahead of Labour would still likely result in Labour winning more seats if replicated in an election, thanks to the more efficient dispersal of Labour voters. I rate the chances of Labour becoming the biggest party in a hung parliament at 40 per cent and thus the chances for the Conservatives at 30 per cent. These probabilities are obviously subjective and not to be taken as exact estimates. But they do indicate my broader conviction that, despite the economic recovery, Labour remains significantly more likely to enter government next year than the Conservatives.

None of these scenarios is particularly attractive for investors. Typically the election of an unapologetically left-of-centre leader like Ed Miliband would be the less attractive option from a market perspective. But the Conservatives’ contortions over Europe and the impossible demands they are likely to make of our European partners in any renegotiation of the UK’s EU membership might make a Conservative victory at least as unpalatable an option for investors.

So if the electorate isn’t particularly impressed by what’s on offer at Westminster, they aren’t alone.

Richard Mylles is a political analyst at Absolute Strategy Research, an independent investment consultancy