James Butterfill, Head of Research & Investment Strategy at ETF Securities, has published research predicting that the UK is set to enter the economic doldrums.
He writes that a combination of weaker loan growth, sterling weakness, squeezed corporate margins and negative real wages are likely to push the UK into a period of very low growth in the coming year.
UK corporates have seen a substantial deterioration in interest cover, and falling earnings caused by a weakening economy are likely to exacerbate the deteriorating economic growth outlook.
More cyclical sectors such as mining tend to be much more vulnerable, Butterfill writes, as does the real estate sector, which tends to decline by 4 per cent over a six-month period.
Butterfill concludes: “We believe the UK’s economic growth prospects are very contingent on economically beneficial negotiations with the EU and a very cautious approach from the Bank of England, as a policy error or a bad deal could tip the UK into recession.”
