As Greece dominates the headlines for austerity-related reasons it should not be forgotten that the UK still has some work to do in this regard. Osborne’s summer Budget is likely to put more meat on the bones of his plans to repair the public finances. It is possible this could cheer markets and further steady the ship for gilts, but again the measures are likely priced in and markets already see Britain as a safe bet.
According to Paul Stephany, manager of the Newton UK Equity fund, UK equities managers are not likely to have a lot of changes to make as a result of the Budget. “It’s all been pretty well flagged in advance,” he said.
Stephany said that the additional £12bn in welfare cuts expected to be detailed could be something to watch for in terms of an impact on UK equities. He said that if they result in more people taking up jobs and reduce the number of long term workless households that could help UK stocks over time.
The introduction of a more generous inheritance allowance could be a small boost for wealth managers and asset management firms given that the extra hundreds of thousands that those inheriting large estates will need to invest once it is liberated from the tax man. This will drip through slowly over years rather than making any short term impact.
