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The sod-it factor: Why Buxton stopped believing GDP numbers


Old Mutual Global Investors’ Richard Buxton believes the UK economy is growing at a much faster pace than official estimates, after the “sod-it factor” prompted consumers to start spending again.

In his first briefing since joining OMGI from Schroders earlier this year, the UK equities manager also said any dips in the market should be used to buy equities and tipped the FTSE 100 to go as high as 7,300 by the end of 2014.

Speaking last night Buxton, manager of the £502.5m Old Mutual UK Alpha fund, noted that recent years have been marked by speculation the UK was in a double-dip recession and even fears the country could be heading into a triple-dip.

He said: “We were convinced it wasn’t that bad – it was just bumping along the bottom, flat as a pancake, but ultimately things would pick up this year and get better next year.

“Now we’re starting to see that in the data. It’s not just the consumer, it’s manufacturing, total, production, construction and even tentative signs in investment.”

The manager also pointed out that UK employment has shown continued, gradual growth over recent years following the “necessary” rebalancing between public and private sector employment. He said employment and the number of hours worked are currently above pre-crisis levels while GDP remains well below this.

Buxton said: “I’ve stopped believing the GDP numbers that the ONS produces. You can count people in work and to some extent you can count hours worked pretty accurately but GDP is just a number made up of different factors you can’t count.

“To my mind, the fact there has been quite a sharp acceleration from the middle of 2011 in employment and in hours worked that has not been matched by GDP suggests to me that GDP is actually stronger than the figures say and it’s probably going to be revised upwards.”

UK GDP has shown strong improvements over recent quarters. In the opening three months of the year, the economy grew by 0.3 per cent – which then accelerated to 0.7 per cent in the second quarter. However, these are still subject to revision.

Buxton argued the good weather over the summer months has “clearly” helped GDP by encouraging spending, as has the boost in discretionary incomes delivered by increased personal tax allowances. Low mortgage rates, driven by the 0.5 per cent base rate and efforts such as the Government’s Funding for Lending scheme, also contribute to this.

He said: “Talking to retailers, there genuinely seems to have been what is known as ‘the sod-it factor’ where people have become fed up with penny-pinching and austerity.”

The manager also tipped the FTSE 100 to end 2013 at between 6,200 and 6,800 and he sees the index ending 2014 between 6,500 and 7,300. He added with valuations at around 12x earnings, conditions are supportive of “good” equity returns over the next 10 years, compared with historical averages.

He said: “If history going back to 1918 is any guide, then shutting your eyes, buying equities today and coming back in 10 years will make you money. I am completely convinced we are in a much better period for equities. Use any dip in the markets to buy equities.”


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  1. I can’t help feeling that there is much more sense in this article than I’ve heard from the BBC Today business news slot recently

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