City raises PM's chances in election following his EU referendum speech

The City is betting that David Cameron has boosted his chances of being re-elected as prime minister in 2015 after his speech setting out plans for a referendum on the European Union.

Spread-betting firm IG Index now prices the Tories' chances of winning the next election at 27 per cent, up from 22 per cent before the speech.

Labour is still seen as the likely winner but leader Ed Miliband's chances have slipped to 36 per cent from 44 per cent.

James Goundry of IHS Global Insight said: "Politically, in the short-term the referendum commitment should help appease the many eurosceptics in the Conservative Party and help maintain unity in the long run-up to the 2015 general election.

"The commitment will also take some of the wind out of the sails of the United Kingdom Independence Party which campaigns for a British exit from the European Union.

"The party has polled relatively well in recent months and threatens to take votes away from Conservative MPs in important constituencies at the next general election."

IG Index last week warned of "low market volatility and fragile consumer sentiment" as it reported a 14 per cent slide in trading revenue.