UK investors brace for recession

A survey of 885 UK-based retail investors has revealed how investors are managing their portfolios in light of high inflation, low growth, subsequent recession risks and the Conservative leadership contest new research commissioned by HYCM has found.

The survey found that the majority (62%) of investors believe the UK will enter a recession before the end of the year, irrespective of the outcome of the Tory leadership contest whilst 50% are concerned that interest rate hikes are not enough to tame inflation, posing the biggest threat to their portfolios.

The trading broker commissioned an independent survey of 885 UK-based investors, all of whom have investments in excess of £10,000, excluding the value of their residential property and workplace pensions.

In the current high inflation, low growth economy, half (50%) showed their concern that the Bank of England’s interest rate hiking cycle will not be enough to stamp out soaring inflation in the coming months, posing the biggest threat to their financial portfolio.

A further 45% expressed their alarm over the prospect that interest rate hikes will dampen economic growth, which they predict will trigger a recession in the next 12 months. That said, 27% of forex investors are looking to increase their FX investment over the next 12 months, as central banks hike their base rates at different paces.

Giles Coghlan, Chief Currency Analyst, HYCM, said: “With the Conservative leadership contest gaining momentum, all eyes are falling firmly on economic policy in the bid for the prime minister role. As Sunak warns that the lights are flashing red on the economy and urgent action must be taken to tame spiralling inflation, Truss and her backers are casting doubt on current thinking from the Bank of England (BoE). Whatever course is taken, our research shows that investors clearly view a recession as inevitable.”

“Heeding warnings of a five-quarter economic decline, our findings suggest that investors are not only acutely aware of the prolonged impact of the current economic crisis, but they are also questioning the BoE’s mandate on inflation and adapting their portfolios for a difficult road ahead. As the cost-of-living crisis continues to bite, it is therefore unsurprising to see many investors reducing their holdings in some riskier and more speculative assets in favour of those that characteristically provide a safe haven in times of uncertainty.”