But the threat of triple-dip remains and, even if this is avoided, fund managers expect the country’s growth to continue to come in below trend.
Despite this, businesses could fare relatively well after building up their strongest balance sheets for the past decade.
David Coombs, head of multi-asset investments at Rathbone Unit Trust Management
“If the worst case scenario in Europe is avoided, the UK will experience a much-needed palliative (by worst case, we refer to the collapse of the euro). Otherwise, the economy is likely to stumble along an uninspiring growth path.
“We would like to see the chancellor curb rising taxes, which are eroding consumer spending power, already under pressure from inflation rates, well above earnings’ rises. We do expect a dislocation of the economy and stock market in the UK, with FTSE returns of around 5% to 6%.”
Alex Breese, head of UK equities at Neptune Investment Management
“UK corporates currently have the strongest balance sheets they have seen for a decade. With generally minimal capacity expansion requirements and low levels of confidence, cash has been slowly building up on balance sheets, to the point where company balance sheets are becoming inefficient.
“We expect to see further cash-back to shareholders, either through higher dividends, special dividends and/or share buy-backs.”
Bill Mott, Neil Cumming and Eric Moore of the PSigma Income Fund team
“In the UK, recovery is likely to be very slow with the Bank of England increasingly worried that the marginal effect of more QE is greatly reducing, whilst inflation (especially imported commodity and energy) looks set to stay stubbornly above the mid-point of the Monetary Policy Committee’s target range of 2% to 3%.”
Andrew Sentance, senior economic adviser at PricewaterhouseCoopers
“Overall, we see GDP being broadly flat in 2012 but picking up in 2013 to 1.8%. Growth rates vary by region but should be positive next year in all cases, supported by recent rises in employment in most regions.
“However, risks from further storms in the eurozone need to be taken into consideration and businesses should make appropriate contingency plans for this.”
