Fund groups “overwhelmingly” anticipate that Labour’s policies will enhance economic growth, research from Quilter Investors has revealed.
The research, Investor Trends Survey, reported that 69 per cent of respondents expect Labour’s policies to enhance economic growth.
Meanwhile, 31 per cent foresee little economic growth and no respondents believe they will reduce growth.
This future growth was attributed to political stability and the subsequent attractiveness to oversea investors.
Quilter Investors investment strategist, Lindsay James, said: “The Labour Party and the City have not always been natural partners, but given its economic inheritance, Rachel Reeves has done a lot to instill a level of confidence in the new government.
“While things are supposedly worse than expected, fund groups clearly think Labour will help stimulate economic growth, at a time when the UK’s fortunes appear healthier than they have been.
“Labour was coy with what it had planned, but markets crave stability. With such a large majority, investors believe Labour does now offer that assuredness, despite the numerous tax rumours, and can bring back overseas investment.”
Additionally, the survey revealed a sense from fund groups that, following a short, shallow recession at the end of 2023, “green shoots” are beginning to reveal themselves in the UK economy.
With inflation back at target and interest rate cuts now being enacted, fund groups are upping their forecasts for UK growth in 2025.
The weighted average predicted growth rate is now 1.22 per cent up from 0.98 per cent when surveyed last quarter.
The research also revealed that, having been surveyed prior to the Bank of England’s interest rate cut earlier this month, fund groups believed August was the most likely month for that first cut, with it being given a 41 per cent probability.
Although rate cuts are now firmly on the agenda, there is little consensus view in the UK for where interest rates will sit by the end of 2025, with views ranging from 2.5 per cent to 4.5 per cent.
Looming over this path for interest rates remains inflation as 47 per cent of respondents expect UK CPI to end the year between 2.51 per cent and 2.85 per cent, significantly higher than where it is now.
Meanwhile, two thirds expect it to remain well above the 2 per cent target level by the end of 2025.
tom.dunstan@ft.com
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