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Recession is biggest threat to investment confidence

A recession is the biggest threat to the finances of active investors or the general public, says the Association of Investment Companies.

The AIC’s latest investor confidence index found that 37 per cent of active investors are most worried about a recession, with the second-biggest cause for concern being a stockmarket crash.

Twenty-four per cent of the general public also say a recession is their biggest financial fear over the next six months, with an interest rate rise being the next biggest cause for concern.

The credit crunch has had an impact on the views of the public as last year’s biggest worry was losing jobs, which was cited by 17 per cent in the 2007 index. The research was conducted through- out February and March and polled a total of 2,121 British adults and 1,085 private investors.

The AIC says the credit crunch and recession fears led to 28 per cent of the public and 26 per cent of active investors cutting spending and saving more each month.

Almost half of active investors – 47 per cent – are aware of the increase to the Isa allowance that comes in on April 6 and 78 per cent of them say they want the annual limit to rise to £10,000 or more.

Seventy-four per cent of active investors are planning to use their Isa allowance but only 30 per cent of the public say the same. Of these, 24 per cent intend to use a cash Isa and 2 per cent plan to invest in an equity Isa while 4 per cent would like to use a combination of both.

Property has dropped off in popularity, with just 2 per cent of active investors backing the housing mar- ket to outperform equities compared with 12 per cent a year ago. The UK remains the top spot for active investors, with 67 per cent favouring domestic equities.

AIC communications director Annabel Brodie-Smith says: “It is hard to predict it is going to be a busy Isa season with the recent doom and gloom. Of course, the recent market conditions are daunting but investors need to take a long-term approach and over the long term equities usually outperform bank and building society accounts.”

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