The United Kingdom is bracing for an extended period of political uncertainty, with polls showing the two main parties almost neck-and-neck going into the general election on Thursday.
Expats living in the Cayman Islands, as well as politicians and financial industry insiders in the British Overseas Territory, will crowd around television screens Thursday night to watch the results come through in what is expected to be the closest U.K. election in 40 years.
Pollsters are predicting that neither Labour nor the Conservatives – the two main political parties – will gain an overall majority, meaning there could be days, even weeks, of backroom deal-making and discussions before a new government is formed.
Many Brits living in Cayman already cast their votes before the April 22 deadline for postal votes, or by proxy vote on Tuesday. The result has potential implications for the Cayman Islands, with the issue of tax-evasion a key talking point on the campaign trail.
Observers here believe the territory can expect more pressure from the U.K. on its financial services industry, regardless of who ends up in power.
“Whatever the face of the U.K. coalition, none of the possible members have any love for offshore financial centers generally, so I think it will be just more of the same,” said Tim Ridley, the former chairman of the Cayman Islands Monetary Authority.
Labour leader Ed Miliband, in particular, targeted overseas territories during the campaign, threatening to blacklist countries that did not create public registers of beneficial ownership for offshore companies.
“Billions of pounds are being lost in tax avoidance. Today we’re serving notice on tax havens linked to Britain that they must open their books within six months of a Labour government, or face international action,” he said in a campaign speech.
His comments were dismissed in Cayman as hypocritical and “out of touch,” but some believe the rhetoric itself is damaging to the islands’ reputation and an example of the increased hostility offshore financial centers could face under a Labour-led government.
Anthony Travers, chairman of the Cayman Islands Stock Exchange, said, “The continued mischaracterization of the Cayman Islands as a jurisdiction where taxes are evaded, which is the underlying implication of the demand for a public register of beneficial interests, made by both the Labour leader, Mr. Miliband, and the Prime Minister, Mr. [David] Cameron, clearly harm the Cayman Islands’ reputation.”
He said British politicians on both sides failed to understand the reasons for Cayman’s success and continued to push for levels of transparency and oversight beyond what was necessary or what currently exists elsewhere, including in the U.K.
He added, “Although we have seen very little in the way of support for the Cayman Islands financial services industry from the current coalition government led by Mr. Cameron, we can safely conclude that a Labour government led by Mr. Miliband would be more, not less, hostile to the offshore financial centers.”
Former Premier McKeeva Bush said historically there had been little variance between the approach of Labour and the Conservatives toward the Cayman Islands.
“Whoever wins, Cayman is going to be in the same boat policy-wise. Between the U.S. and the U.K., they are going to put a lot of pressure on Cayman’s financial industry.”
Mr. Bush said he hopes whoever gets into power will take a different approach toward relations with Cayman and will treat the island “more equally.”
He believes Mr. Miliband is the most likely prime minister, likely in coalition with the Scottish National Party.