A recent poll by news agency Reuters has hinted that the UK economy could contract by 0.1% in each of the next two quarters, which would be classified as a recession and could prompt the Bank of England to shave a further fraction off of the Base Rate later in the year.
A fall in business investment is largely blamed for the forecast, with many firms holding off investment until more clarity over the Government’s Brexit time-table is outlined. Chancellor of the Exchequer, Philip Hammond, intends to review government tax and spending policy in a budget update later this year, with some economists urging him to launch a programme of debt-finance investment projects to support the economy.
But, despite the mixed forecasts, the FTSE 100 stands at a 14-month high, with major investors clearly remaining confident of the longer-term strength of the equities markets, which are historically a proven and profitable investment strategy even in times of economic uncertainty.
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