Leading Investors Comment on UK Budget
British Chancellor of the Exchequer Philip Hammond's UK budget today prompted a flurry of comments from leading investors in the UK.
Shilen Shah, Bond Strategist at Investec Wealth & Investment, said: “Brexit remains the key area of uncertainty for both GDP growth and the budget deficit, with the key unknown being whether a comprehensive deal can be achieved in both the goods and service sectors. In anticipation of costs associated with new a relationship with the EU, the government confirmed that it had already spent £750m on Brexit preparations, with a further £3bn set aside. The key risk for the economy however remains whether a service sector agreement can be reached, given that it makes up more than 80% of the economy and its one area of trade where the UK has a surplus with the EU –in contrast to the manufacturing sector.”
Hugi Clarke, Director at Foresight Group, said: “The Chancellor’s decision to remove low risk EIS is designed to refocus these investments away from ‘low risk’ structures and towards innovative companies with the opportunity for growth. EIS has been acknowledged as a key component in supporting these businesses as evidenced by the doubling of investment limits for technology based ‘knowledge intensive’ companies.
“Importantly, the changes leave the unique tax advantages of this vehicle in place. An EIS remains attractive to those investors who can take advantage of the tax benefits and accept the associated risks. The ability to access 30% income tax relief, 40% IHT relief and up to 28% CGT deferral while enjoying the potential for significant upside compares favourably with ISA and pension alternatives and will continue to be an attractive part of a diversified portfolio.
“VCT and EIS remain a unique investment opportunity while just as importantly continuing to support UK business. The attraction of these products has meant that between April and October VCT inflows were up 100% against the same period last year while total fundraising is expected to exceed £800 million this year, the sector’s highest ever.”
Michael Metcalfe, global head of macro strategy at State Street Global Markets offers his views.
“The government has committed funds to help with the preparation for Brexit contingency planning, but the real challenge for UK markets revealed in the budget came from the Office for Budget Responsibility (OBR) and the significant downgrades to the UK growth outlook. Still high inflation and an expected weakening in growth provide a potentially troubling backdrop for markets even without the political uncertainties created by Brexit.”