INVESTORS have staked millions of pounds on the result of the general election with spread-betting firms.

Sporting Index, a spread-betting firm with a 65% share of the market, has taken bets worth £1.5m and it expects the figure to soar to between £3m and £4m by election day on May 5.

Wally Pyrah of Sporting Index said: “We are expecting to take more money on the election than the FA Cup Final.

"Everyone from ordinary investors to people who work in the City and academics who specialise in politics are spread betting on the election. We even have some Tory MPs who are betting on their own party to win, although they refuse to be named, perhaps given the size of the potential losses.”

He said the biggest bet so far was from a Conservative supporter who staked £3,000 on every seat that the party wins above 216. At current Sporting Index prices, which give the Tories between 190 and 194 seats, he would lose £78,000. If the result of the 2001 election were repeated, with the party winning just 166 seats, he would lose about £150,000.

Pyrah said: “The client could have closed his bet, but he has chosen to keep it open so he must be hoping for a last-minute surge in support.”

Stuart Wheeler, a prominent Conservative party donor who founded IG Index, another spread-betting firm, has also bet that the Tories will do better than in 2001 — he has gambled £200 for every seat that the party wins above 197. At current IG prices, which put the Tories on between 189 and 194 seats, he would lose £1,600.

In the last election, investors made money by betting that turnout would be lower than expected. Two weeks before the election, the market was pricing in a turnout of between 64.5% and 66% of the electorate, but in the event the figure was 59.4%.

Andrew Garrood of Cantor Spreadfair said it might be worth gambling on the turnout again this year. The market is pricing in a figure of between 60.4% and 61% of the electorate, above 2001’s level. He said: “Some people have argued that the low turnout in 2001 was a one-off because Labour’s majority was so big, but the figure was above 75% in the peak Tory years. A turnout below 60% could be the start of a new trend.”

If you expect turnout to be lower than the market, you could bet a certain amount for every point below 60.4%. If you bet £100 a point and turnout was 59%, you would win £140.

Spread betters also made money on the Liberal Democrats in 2001. At one point in the campaign, the market expected the party to win only 40 seats, but they acheived 52 on election day, generating big gains for punters who backed them.

However, investors also suffered big losses in 2001. One Sporting Index client lost £120,000 — the biggest loss in an election — after betting the Tories would win more than 206 seats. They managed only 166.

Two weeks before the election in 2001, the market expected Labour to get between 407 and 411 seats, giving the party a majority of 156 to 162. It was very close: Tony Blair’s party was swept back into power with 412 seats and a 165-seat majority. However, the similarity between the market prices and the end result made it difficult for punters to make big gains on the winning party.

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