Page 4 - April ISQ 2021

INVESTMENT STRATEGY QUARTERLY

Hope For Growth In The U.K.

Chris Bailey, European Strategist, Raymond James Investment Services Ltd.

Classically, economic growth is determined by a combination
of consumer spending, investment levels, overall net govern-
“ To live without hope is to ment initiatives and global trade opportunities. Despite the
introduction by the U.K. government of significantly wide-
cease to live ” – Fyodor Dostoevsky spread furlough schemes, consumer spending, corporate
investment levels and global trade levels all fell significantly.
Unsurprisingly a U.K. economy which is progressively moving
significantly away from a period of lockdown will naturally
progress. However - sadly - no period of significant economic
Whilst U.K. economic data in 2020 saw its biggest support can be achieved without major cost. And this starts
with U.K. debt levels.
contraction in over three centuries (back in 1709 the
agricultural centred U.K. economy suffered an even Whilst we continue to experience extremely low interest rates
combined with significant amounts of Bank of England stim-
worse economic decline due to that year’s great frost),
ulus, a significant heightening of national debt levels is a short,
the positive prospects for 2021 have continued to medium and longer-term problem. Current government bor-
improve. The most recent data from the International rowing levels are anticipated to reach nearly seventeen percent
Monetary Fund (IMF) has predicted that the U.K.’s near of GDP in the financial year at the end of March 2021, the highest
ten percent economic contraction last year will be level of peacetime borrowing on record. Unsurprisingly whilst
there have been some indications of higher mainstream busi-
regained by the end of next year, a view shared by the
ness tax rates later on this decade, these levels still remain
recent budget announcement from the U.K. government. relatively light compared to many other countries around the
So are economic growth prospects - boosted by the world. Additionally a new policy initiative to try to encourage
recent significant COVID-19 vaccine progress - inexorably business investment expenditure is a positive effort, as this
should encourage both corporate growth as well as new job
strongly recovering?
employment. And whilst the freezing of personal taxation levels
will mean anyone with a gain in their wages will pay more tax,

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