Neptune’s Paul Caruana-Galizia: what’s behind the UK’s recovery?

The UK is ending what has been its slowest economic recovery on record with a marked acceleration in growth. Neptune’s forecast for UK GDP growth in 2014 is 2.5 per cent, up from 2013 growth of 1.8 per cent as estimated by the Office for National Statistics. When considering the changing UK macro outlook, three important questions remain:

1. What explains the recent acceleration in growth? 
UK banking sector losses were concentrated in non-UK assets. Improving credit provision depended on deleveraging happening overseas, particularly in the eurozone. As external conditions improve, largely due to European Central Bank intervention, the UK’s banking system is recuperating and domestic financial conditions are easing.

We have also seen improvements in external demand among the UK’s biggest export partners. According to the latest IMF data, 55 per cent of the UK’s exports go to the EU and 11 per cent go to the US. Both regions are registering faster GDP growth and purchasing manager indices (PMIs) are in expansion territory.

To read the remaining questions, please click here.

Paul Caruana-Galizia is an economist at Neptune Investment Management

Important Information: This is not for retail clients. It is intended for investment professionals and is not for forward transmission.

Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason, the comparison index should be used for reference only.

This fund may have a high volatility rating and past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may not get back the original amount invested.

This fund may invest more than 35 per cent in government and public securities in a number of jurisdictions. The information provided is a general summary and is for information purposes only. This should not be taken as a recommendation to advice to purchase or sell any investment. It does not form part of any contract for the sale or purchase of any investment. Neptune does not give investment advice and only provides information on Neptune products.

Any views expressed within this communication are those of Neptune as at the date of issue. We do not undertake to advise you as to any changes in our views. The information and statistical data contained in this email has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness.



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