Invesco Perpetual income guru Neil Woodford has warned that the chances of a double-dip recession in the UK are on the rise.
He says the possibility of two quarters of negative GDP is directly linked to the increasing likelihood of more spending cuts and bigger budget deficits. He says house prices could drop significantly, claiming a fall of between 5 and 10 per cent a year for the next three years is possible.
Woodford adds that it is deflation, not inflation, that is his biggest concern in the UK. He highlights the impact of VAT increases and a lack of pricing pressure as contributors.
The fund manager, who is known for his bearish views on banks, says that Basel III will not have an impact on his holding in banks, claiming the directive has been “deferred and diluted” as banks continue to rebuild their balance sheets.
He says: “It gives the impression that banks are still in a mess, more so in Europe than the UK or the US. This is almost an acceptance that the banks are still too weak.”