DOMESTIC POLITICS: With the next general election firmly on the horizon--it must be held by June 3rd 2010, and a date in early May is likely--the governing Labour Party continues to lie well behind the main opposition right-of-centre Conservative Party in opinion polls. The combination of a severe economic recession, the deep unpopularity of the prime minister, Gordon Brown, a fatigued third-term administration and factional strife spilling over into party indiscipline has contributed to a steady erosion of the government's authority. Mr Brown has failed to offer a strategic purpose for his premiership or to connect with voters, while his past reputation for "prudent" economic management has been exposed by the financial crisis, which has highlighted underlying weaknesses in the economy (its dire fiscal position, a highly exposed and poorly regulated financial sector and, until 2008, an unsustainable housing and credit boom). Although the Conservatives' response to the crises has been unconvincing, Labour remains on course to suffer an election defeat, particularly if Mr Brown (widely viewed as a liability to his party) stays as prime minister, as he is determined to do. Having faced down previous leadership challenges, he looks likely to survive until next year's election, but with little authority over a divided party and demoralised cabinet, and the economic outlook still bleak, his government will struggle to achieve anything of note in its remaining time in office. A sense of disenchantment with Labour (and Mr Brown) now prevails among the electorate, and despite little enthusiasm for the other main parties (widespread disillusionment with the political classes is likely to boost electoral support for smaller Eurosceptic and far-right groupings), our central forecast is that the Conservatives will defeat Labour at the election and gain a modest overall parliamentary majority. The softness of the Conservatives' support and public disenchantment with politicians in general does mean, however, that a hung parliament cannot be discounted, with the centrist Liberal Democrats as a likely kingmaker.

Source: United Kingdom: Country outlook

Source: Country Forecast United Kingdom May 2009

Source: EIU Country Data