Burnham’s ‘costly’ policy agenda sparks investor nerves

Andy Burnham's ambitious policy agenda and rising inflation concerns are dampening investors' enthusiasm for the UK, according to Berenberg's Investor Barometer. Conducted amongst 300 international investors managing $1 trillion in assets, the survey revealed that 40% of respondents cited policy decisions as the greatest risk to the UK economy, unchanged since the last poll despite a change in government.

This indicates a "continuing lack of confidence in the current administration’s long-term fiscal framework", according to the study's authors.

Despite boasting the most ambitious deficit reduction path of any G7 economy, Burnham's government has faced skepticism over its spending plans. "New Prime Minister Andy Burnham’s costly initial ambitions kept government policy at the top of the list of investor concerns," said Berenberg chief UK economist Andrew Wishart. Burnham and Chancellor have acknowledged that higher spending is misguided at a time when borrowing and tax burden are already problematic, which reassures investors that they will avoid a major policy error.

Inflation remains a significant worry, with double the number of asset managers expressing concerns about its pace. Currently well above the Bank of England's 2% target, inflation is expected to exceed 4% early next year as higher energy costs from the Iran conflict start appearing on household bills and spreading throughout the economy. Investors expect the IPO market to remain subdued, with only 32% of money managers expecting a rebound in London's IPO market within the next 12 months, down from 63% six months ago.