LONDON- No political party has enough support to win outright control of parliament in the forthcoming election, raising the prospect of a period of unstable minority government, opinion polls showed on Tuesday.
The Conservatives' poll lead has dwindled in the run up to an election expected on May 6, suggesting that the centre-right party will struggle to get the votes it needs for a workable majority.
Analysts say Labour might even cling to power for an unprecedented fourth term, but a hung parliament is looking the most likely scenario at present.
Investors are concerned that political gridlock will hamper efforts to cut a record budget deficit and result in a downgrade to Britain's triple-A credit rating, which could drive up borrowing costs.
Unlike much of continental Europe, Britain has no tradition of coalition governments. During two short periods of Labour minority rule in the 1970s, the government was dependent on case-by-case support from small parties to pass legislation.
Uncertainty about the election and a deficit set to top 12 percent of gross domestic product this year pushed the pound to a 10-month low below $1.50 last week.
A daily YouGov poll for the Sun newspaper put the Conservatives five points ahead of the government with 39 percent of the vote, a result which could leave Labour as the largest party in parliament but short of an overall majority.
The Conservatives need a lead of around 10 percentage points in opinion polls to overcome Labour's current majority.
A separate poll for the Times newspaper showed the gap between the two main parties in key marginal seats has closed.
If replicated in the election the Conservatives would gain 97 Labour-held seats, the Times said, leaving the Conservative party short of an overall majority.
The Populus poll looked at the 50th to the 150th closest marginal seats, in which the Conservatives came second at the last election, and found that both parties had about 38 percent of the vote.
The Times survey excluded the 50 Labour-held marginals considered most likely to swing to the Conservatives.
The poll of 1,500 voters between March 5 and 7 also showed voters increasingly expect no party to win an outright majority.
A separate poll for the Daily Express, carried out by Opinium between March 5 and 8, showed the Conservatives with 37 percent of the vote, while Labour were up one point with 30 percent and the Liberal Democrats with 16 percent.