UK Weekly Kickstart: When Weak Growth Meets Fiscal Limits

The UK economy is experiencing weakening growth momentum and labor market softening, complicating a tight fiscal outlook with only ~£12bn in headroom. While political uncertainty is rising, the potential for higher capital gains taxes is viewed as a low-risk event for the broader equity market due to its international composition.

Key Takeaways

• 1.UK growth momentum is weakening despite a solid Q1 GDP print, with forecasts for ~1% growth over the next four quarters.
• 2.Fiscal headroom has narrowed significantly to ~£12bn, leaving tax increases as a likely lever for consolidation.
• 3.Potential increases in Capital Gains Tax (CGT) are expected to have limited impact on UK equities due to high foreign ownership and tax-exempt holdings.

Table of Contents

• Equity Performance (in GBP)
• FTSE 350 Sector Performance
• Earnings Expectations and Revisions
• FTSE 350 Valuation
• UK Sector Valuation
• Style Performance
• UK Style Valuation
• Volatility, Skew, Dispersion and Correlations
• Flows and Positioning
• Comparison of European Indices
• Global Strategy Views: Indices and Asset Classes
• UK Exposure

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