15 March 2023
If you are covering the market reaction to the UK budget, please find below a comment from Marcus Brookes, chief investment officer at Quilter Investors:
“Today’s budget has been delivered under the backdrop of a seemingly teetering global financial system with the fallout from SVB and Credit Suisse weighing on share prices. Unlike the ‘mini-budget’ of September, the Government will be relieved it is global actions disrupting markets rather than its own policies.
“Indeed, the Chancellor was keen to stress that the UK is back on the track to growth following a difficult 2022 and start to 2023. The Chancellor may have said that the UK won’t enter a technical recession this year, but for many this will have felt like one, and it is hard to get away from the fact that growth has stagnated. Jeremy Hunt’s positivity is perhaps slightly premature, particularly given the backdrop, but it can be said that with energy prices where they are and inflation beginning to fall back, we are in a better position now than we perhaps were six months ago.
“However, the forecasts from the Office for Budget Responsibility highlights the difficult path the UK faces. It still expects the economy to contract this year, and the level of debt is still at extremely elevated levels. Given that inflation in the US is proving stickier than first feared, its forecast that inflation will fall to 2.9% is ambitious and goes well beyond the Government’s plan to half it this year. It is hard to get away from the fact that currently growth is stagnating and while some of today’s announcements will help, that growth cannot be conjured up quickly. Mixed together with the current macroeconomic backdrop and slowing growth globally, the UK will do well to hit those OBR targets.
“For investors, the UK remains somewhat of a difficult place to judge right now despite the improving picture. With financials dominating the UK market the macroeconomic backdrop will weigh on share prices and it seems conditions could deteriorate further. It is environments such as this that highlights the importance of investing in quality companies with resilient revenue streams and that will benefit from the Government’s policies.”
