Can the UK capitalise on the global recovery? There is no denying that UK economic data should come through very strongly in the coming months as the service sector opens up. But how does the outlook stack up over the longer term? On trade, the rule of thumb is that gravity works: countries tend to trade more with their neighbours. Instead, the UK government is focusing on more distant Emerging Market and US access. With this in mind, we look at where the U's strengths lie and how to capitalise on them.
- The UK economy is likely to rebound in the coming months, and consumer spending indicators are climbing, Q2 GDP should be almost 20 per cent higher than a year ago.
- There is an 11 per cent fall in total goods trade with the EU in the year to February. Post-Brexit, the UK is hoping to defy gravity – where trade tends to decrease with distance - with a focus on trade growth opportunities with Asia and the US.
- Outperformance of the domestic cyclical is possible over the next quarter given the rebound in consumer confidence on the back of a reopening economy and successful vaccine roll out.
- Over the medium to longer term we favour larger companies that can better navigate the trading environment or high growth areas that are likely to be the focal point of any new trade deal such as, clean energy, healthcare and artificial intelligence.