LABOUR will comfortably hold off a challenge from the Tories and finish second at the Holyrood election - according to a betting company hailed by Alex Salmond for its accuracy.

Sporting Index, a spread betting firm which offers punters the change to bet against its own predictions, believes that Kezia Dugdale's party will be left with 26 seats, a significant reduction on its 2011 tally, but will remain the official opposition with the Tories in line to return 18 MSPs.

It has forecast that Nicola Sturgeon will beat Mr Salmond's own historic majority which he led the party to in 2011, with his successor and current First Minister on course to win 71 of the 129 Holyrood seats.

According to the firm's markets, the Greens will overtake the Liberal Democrats to become Holyrood's fourth largest grouping of MSPs, winning seven seats, one more than Willie Rennie's party. Ukip would achieve its first ever representation in the parliament, winning one seat.

Its analysts also believe that a surge in democratic engagement in Scotland due to the referendum has now fallen flat, predicting that turnout will be just 54 per cent, compared to 71 per cent at last year's general election and 85 per cent for the independence vote. If correct, it would mean only a marginal increase from 2011, when just half of electors bothered to vote in the Scottish Parliament poll.

Ed Fulton, political spokesman for Sporting Index, said: "It’s a near certainty that the SNP will win a majority at Holyrood, but Scottish Labour finishing eight seats clear of a supposedly resurgent Tories may be the most surprising result of the night.

"Scottish voter turnout at the General Election was higher than anywhere else in the UK, but with just 54 per cent expected to cast their vote on 5 May, there are signs that the electorate may be tiring after a third major election in two years.

"Though the Scottish Greens look set to finish ahead of the Liberal Democrats, and the SNP look invincible, there are still two weeks to go until polling day – an eternity in politics."

The principle of spread betting is that the punter is invited to challenge a prediction made by Sporting Index by betting higher or betting lower on that forecast. Profits or losses are calculated on how right or wrong the gambler is with the outcome.

Ahead of last year's general election, Mr Salmond, who previously wrote a weekly horse racing column and used betting markets to gauge support for the Yes campaign during the referendum campaign, said he puts faith in spread betting markets, believing they were informed due to the fact that "real money" was talking.

The former First Minister won a series of bets on the election, correctly predicting that Ian Blackford would win in Ross, Skye and Lochaber at odds of 3/1 and backing the SNP in Dundee West at 4/6, where his party went on to win more than 60 per cent of the vote.

However, Sporting Index has been known to overstate Labour support in the past, predicting last March that the party would retail 14 MPs, compared to the one eventually it ended up with.