Our Global Energy Perspectives Team has conducted an assessment of the UK's macroeconomic outlook, real economy and asset markets.
The Invasion of Ukraine is creating a twin crisis of rapidly accelerating inflation and rising interest rates. Collectively these represent a major shock to the UK’s economic outlook, which is already underperforming in light of the Covid pandemic as well as Brexit trade and investment weakness. The UK economy is likely to contract by c.2% over 2022-2023.
Consumer weakness is expected to be the main driver of contraction, with disposable incomes facing the largest single-year reduction since WWII, falling by c.4-5% in real terms for the average household in 2022.
Our sector earning forecasts show significant contraction in earnings for consumer-facing sectors but greater resilience in counter-cycle sectors such as Financials.
Asset markets face a prolonged period of uncertainty as the period of ultra-loose monetary policy which has support valuations since 2008 is unwound. We see continued weakness in global equities, particularly in growth and consumer stocks and falls in UK property valuations of c.5-8% over the next
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