Mandelson Says Investors Have `Discounted' Risk of Hung Parliament in U.K.

Business Secretary Peter Mandelson sought to reassure investors that a hung Parliament, where no party has overall control, would not lead to instability after the May 6 election.

“I think that the markets have pretty well discounted whatever the result,” Mandelson told reporters in London today. “I think that they know that in our political system you will get sensible, stable, grown-up politics.”

Mandelson’s remarks contradict George Osborne, the opposition Conservatives’ treasury spokesman, who yesterday predicted a hung Parliament could lead to a “dip in confidence,” a slump in the pound and “disastrous” increases in interest rates that would “paralyze” the country.

Investors and economists have said that the failure of any single party to secure a majority in Parliament may unsettle markets on concerns budget cuts would be delayed. “Investors are likely to react negatively to any variation of a hung parliament outcome,” Nomura Holdings Inc’s senior political analyst, Alastair Newton, said in a note to investors yesterday.

Debt-rating agencies have said that Britain, with a budget deficit on a par with that of Greece, is at risk of losing its top credit grade. Standard & Poor’s on March 29 kept its negative outlook on the U.K. AAA level.

“The surest way for stability is to vote Labour,” Mandelson said today. “We have successfully navigated the country through the global financial crisis. I think the markets and others internationally recognize that and applaud it.”

A daily ComRes Ltd. opinion poll published yesterday found 32 percent of respondents supported the Conservatives, 31 percent backed the Liberal Democrats and 28 favored Prime Minister Gordon Brown’s Labour Party. The survey is the latest to suggest the election may produce the first Parliament since 1974 in which no party holds a majority.

To contact the reporters on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net; Svenja O’Donnell in London at sodonnell@bloomberg.net.

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