The possibility of the UK's first hung Parliament in more than 30 years has shaken the pound amid worries over delays in tackling the country's huge deficit.

The shortening odds on the first indecisive election result since 1974 has already sent sterling to a 10-month low against the dollar and it is currently languishing around the 1.50 mark.

Confidence over the political appetite to deal with the impact of a recession which will push borrowing to £167 billion this year is key if international investors are to continue buying UK debt.

But a weak minority adminis-tration could lead to delay on tackling the debt mountain before another potential election - potentially resulting in the loss of the UK's triple-A credit rating and a sell-off of the country's debt.

Ratings agencies have so far given a stay of execution for the UK's sovereign rating but this is unlikely to last in a period of prolonged political limbo.

Royal Bank of Scotland economists currently predict a two thirds chance of a hung Parlia-ment, although Roger Bootle of Capital Economics has warned of possible "mayhem" in markets the day after this is confirmed - with investors dumping the pound and government debt.

Gilt yields have climbed higher as the market-perceived riskiness of government debt climbs, along with the chances of no overall majority for either side or a Labour victory.

The last time the country was presented with a hung Parlia-ment - between February and October 1974 when Harold Wilson finally secured a majority - the FTSE All-Share fell by 48 per cent in six months.

Inflation hit 17 per cent, interest rates stood at 12.5 per cent and gilt yields jumped from below 11 per cent to almost 15 per cent. The Bank of England would spend billions supporting the flagging pound before an IMF bailout two years later, as the UK economy reeled from the oil crisis as well as rampant trade unions.

With the current woes of Greece and fears of sovereign debt default shaking the market, experts point out that in some respects the UK position is more perilous than the 1970s.

JP Morgan's head of economic research Malcolm Barr has said the UK's fiscal position looks "significantly worse" now than in the 1970s - with borrowing soaring to 12.7 per cent of GDP compared with just seven per cent more than 30 years ago.

But he adds that the country is likely to fare better due to far greater political will to cut spending than back in the 1970s and the era of beer and sandwiches at 10 Downing Street.

Then, Harold Wilson struck the "Social Contract" with the trade union movement to limit pay demands in return for the repeal of Conservative premier Ted Heath's Industrial Relations Act, but the agreement failed to bring inflation under control.

Mr Barr added: "All three major parties have explicitly recognised the need for fiscal consolidation and to limit spending and tax commitments as a result.

"Back in the 1970s, the need to make such choices was recognised later and faced more serious public resistance."

The UK now also has a far greater pool of capital worldwide on which to draw to fund the deficit, he adds, while the influence of organised labour has diminished significantly.

In 1974, Mr Heath went to the country with the question "who governs Britain?" in the face of a miners' strike and a three-day week - and lost.

In 2010, public sector unions are likely to rail against a savage programme of spending cuts - which politicians of all colours warn will be deeper than under Margaret Thatcher - but they will not bring down the government.