Investment Clock insights

UK moves towards recession; expect further sterling weakness

Trevor Greetham

22 July 2016

Today saw a record one month drop in the UK Services Purchasing Manager's Index (PMI) and a fall in manufacturing confidence to levels that suggest the UK economy is contracting at the fastest pace since the financial crisis in 2009.

The UK vote to leave the EU was unexpected and the shock and will cause large purchasing decisions to be deferred. There is also significant uncertainty on the outlook for manufacturing and financial services that will cause investment plans to be shelved or delayed.

Easier monetary and fiscal policy will follow and the shock effect will fade, but we expect sterling to weakness to continue as a drop in the value of the pound is part of the adjustment process.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.