U.K. Election Worries Weigh on Pound

The question mark hanging over Britain's political future is weighing heavily on the pound, pushing the currency down on election day.
Author:
Publish date:

LONDON (

TheStreet

) -- The question mark hanging over Britain's political future is weighing heavily on the pound, pushing the British currency down against the dollar on U.K. election day.

Despite

predictions that the pound would weather the uncertainty surrounding the country's tight election race

, sterling fell to its lowest rate since March on Thursday.

The currency slipped to $1.478 versus the dollar by late afternoon, down from $1.50 on Wednesday. The U.K. election, which is being played against a backdrop of economic crisis, is expected to result in a "hung parliament" where no political party holds a majority.

Gordon Brown, Nick Clegg and David Cameron

An eve-of-election poll by YouGov gave David Cameron's Conservatives 35% of the vote, followed by the governing Labour party with 28%. The Liberal Democrats also had 28%. This roughly mirrored a poll by Populus for the

Times

newspaper, which put the Conservatives at 37% of the vote and Labour on 28%. The Liberal Democrats were at 27%, it said.

The U.K.'s polling stations closed at 5 p.m. ET, and results from the country's 650 constituencies will trickle in through the night. The

first exit poll

, released by the BBC, ITV and Sky News, estimates that the Conservatives will clinch 307 seats in parliament, 19 short of the 326 needed for an overall majority.

If the exit polls are correct, the U.K. could be heading towards political limbo, or "hung parliament." This could mean the creation of a coalition, or even minority, government.

With Britain's budget deficit expected to surpass that of

Greece

, the U.K. election is also being played out against a backdrop of growing economic upheaval.

All three parties acknowledge the importance of tackling the U.K.'s crippling 167 billion-pound ($252.1 billion) budget deficit, with the Conservatives adopting the most aggressive approach. If elected, Cameron has vowed to attack public spending this year, although Gordon Brown is adopting a more cautious approach, planning cuts in 2011.

Clean-cut Liberal Dem leader Nick Clegg recently summed up the mood of fiscal consensus in the last of three televised debates between the party leaders. A hung parliament, he explained, would not result in "Armageddon." He added that the parties should co-operate on key issues such as the budget deficit regardless of the election's outcome.

Gordon Brown, who recently

attacked the "moral bankruptcy"

of

Goldman Sachs

(GS) - Get Report

, is fighting a dogged campaign to keep his party in power, and used his last major election to speech to

warn that economic recovery would be at risk under a Conservative government

.

Prior to becoming Prime Minister, Brown spent years as the U.K.'s Chancellor of the Exchequer, or finance minister, but his time at 10 Downing Street has coincided with the country's worst recession in almost a century.

Another key yet often overlooked factor in the U.K. election could be the political expenses scandal that rocked the country last year and tarnished a number of politicians across all three political parties. There has been talk that many voters will bear this in mind when heading to the polls today, adding yet another variable to an election that its already hanging on a knife edge.

-- Reported by James Rogers in New York

Follow James Rogers on

Twitter

and become a fan of

TheStreet.com

on

Facebook.