Woodford Investment Management  

Woodford reckons UK is doing better than GDP suggests

Woodford reckons UK is doing better than GDP suggests

The recent disappointing GDP data for the UK economy is likely to be revised upwards later as the economy continues to grow, according to fund manager Neil Woodford.

Data for the first three months of 2018 showed gross domestic product (GDP) growth of 0.1 per cent, the lowest level for five years.

The fund manager said: "GDP is very hard to measure, with growth figures from 10 years ago being revised upwards. I think the most recent GDP number in the UK will be revised upwards."

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He said the fact retail sales were 3 per cent more in the first quarter this year when compared with the same period last year, while 427,000 more people are in employment at the end of March when compared with the end of December are reasons why he thinks the economy is performing better than the GDP number indicated.

He expressed confidence in the health of the UK mortgage market, and said 61 per cent of mortgages in the UK are now on a fixed rate, which means were interest rates to increase, there shouldn't be a crisis in the housing market.

This, and other reasons, have led him to invest in UK banks, and he is particularly keen on the shares of Lloyds Banking Group.   

Mr Woodford said: "Specifically, we view Lloyds as a well-managed bank with a conservative approach to its balance sheet.

"Its valuation looks very attractive in our view, and it has the ability to generate substantial capital in the years ahead, which will fuel a very healthy and growing level of dividend.

"Since introducing Lloyds to the portfolios in the first half of 2017, the investment thesis has been playing out positively.

"Its share price, however, does not yet reflect the positive operational progress that the business has been making."

David Scott, an adviser at the firm of Andrews Gwynne in Leeds said the biggest threat for investors is political turbulence at the global level.

He said the “union” between capitalism and centrist politicians requires the latter to create a stable and prosperous middle class.

He said the inability of many middle earners in the UK and elsewhere to get on the housing ladder has contributed to political uncertainty and the risk that extremist politics becomes dominant.

david.thorpe@ft.com