Prominent figures across the investment sector have reacted to the latest economic news, showing the UK’s GDP expanded by 0.3 percent last month. The results provide a contrast to the 0.4 percent slump recorded in April.
Alessandro Capuano, Global Head of Brokerage and Business Development at Fineco Bank, argued that the UK remained in an increasingly volatile situation, citing the effects of Brexit preparations and retail sales.
He said: “Following two months of ups and downs off the back of the impact of Brexit stockpiling back in March, the UK is now slightly more fragile than it was last quarter. Yesterday’s negative retail sales fuelled by a milder summer was a clear indicator of what we could expect today.
Mr Capuano was pessimistic on the ramifications of the most recently announced figures despite the UK returning to economic growth.
He added: “Political uncertainty and global feuds are having a direct effect and weakening not only the UK economy but also the value of Sterling, which today reached a 6 month low. With the summer holiday season round the corner, this means UK travellers will be receiving less euros or dollars when they exchange their pounds.”
Phil Smeaton, Chief Investment Officer at Sanlam UK had a more equivocal outlook on the situation, noting the positive job growth but also acknowledging the underwhelming GDP performance.
He said: “The UK economy was a welcome bright spot at the start of the year, with jobs being created and wage growth remaining strong. However, while job growth remains robust, GDP performance is underwhelming as we see the pre-Brexit stock building boost starting to wear off. Market indicators are giving cause for concern and investor optimism is experiencing a wobble.
Mr Smeaton argued the clarity was required to definitively improve the UK’s economic prospects, improving the environment for investors, even if global commercial conflicts could have an effect beyond the nation’s control.
He said: “Global uncertainty is playing a notable part, with the US/ China trade dispute rumbling on. But it is the domestic political uncertainty where the real worries lie. Despite the bluster of the Conservative leadership campaign, the numbers in Parliament are unmoved when it comes to Brexit. With the opposition struggling in the polls, a pre-Christmas General Election looks to be on the cards. Only when businesses in the UK are given clarity of the future can the economy really find its feet again.”
A sunnier assessment on the figures was offered by Andy Scott, Associate Director at JCRA, who considered the UK economic surprising.
He said: “Sterling made tentative gains after data showed the UK economy proved more resilient than expected in May, following the sharp contraction in GDP in April. The three months data to May showed the economy grew 0.3% over the previous three months. This was much better than expected as the monthly PMI survey data for the period suggested the economy stalled. This poses the question of whether business concerns over Brexit are causing a distortion of the headline PMI data, with sentiment worse than reality.
Nevertheless, he did outline that several issues could still cause problems to the UK economy.
He added: “While the economic landscape is far from rosy, there are some elements of the economy such as very low unemployment and rising real terms pay that continue to underpin growth. Brexit is certainly dampening the potential of the economy, but UK plc’s are perhaps becoming more accustomed to the uncertainty and just keeping calm and carrying on!”
Commenting on the more immediate future, he said: “Though Sterling strengthened after the GDP news, it is still trading close to its lowest levels of the year against the Dollar and the Euro due to fears that Boris Johnson will become PM and pursue a hard Brexit.”