Economy expected to contract by 3% over the next year

Unfortunately, 2009 has started in the same vein as 2008 ended. The UK is in recession, and negative...

Unfortunately, 2009 has started in the same vein as 2008 ended. The UK is in recession, and negative revisions to UK GDP have been greater than for many other countries. We expect UK economic output to contract by 3% in 2009. Against this backdrop, inflation will fall sharply, with CPI falling from 3% to zero by the end of 2009. Fears of deflation are now very real, particularly with unemployment rising sharply, although this should be partly offset by the rapid decline in sterling, which has increased the cost of imports. In view of the challenging environment, our UK equity portfolios...