Haig Bathgate
Chief Investment Officer, Turcan Connell Asset Management

George Osborne's 2013 budget has reinforced our central belief that global equity markets continue to offer a better opportunity than gilts. The winners are those who appreciate the benefits of investing in quality companies and diversifying their holdings across an increasingly interdependent and globalised world, while we believe firmly that the losers will be those who cling onto the notion that conventional UK government bonds are inherently safe – in capital terms they are not.


We have been positive on global equities for some time, on the view that the strong recovery in the US will lift growth around the world, including UK market; although we remain concerned about the outlook for the UK economy, the majority of large companies listed on the UK stock exchange are global businesses which will benefit from an upturn in the fortunes of the world's largest economy. That view is further reinforced by the increasingly pro-business stance of the government with the latest reduction in corporation tax rates.

The UK economy is largely driven by the consumer and any initiatives that increase confidence, but don't worsen the precarious state of country's finances, are welcomed. Consumption has lifted us out of previous recessions and we have no reason to believe it will be different this time. We therefore welcome the decisions to help the housing market, help the shale gas industry and reduce the national insurance burden (which has a disproportionately positive impact on smaller companies).

And ironically, our economic difficulties at home might actually benefit our exporting businesses, by lowering the value of sterling, thereby inflating profits earned abroad.


Our main concern is that these positive steps mentioned above amount to too little, too late. The economic outlook is bleak, with the growth forecast cut by half for this year. That's more bad news for those investors who bet on the government's economic fortitude – in other words holders of gilts. The worst outcome of this budget is the loss of credibility for the Office for Budget Responsibility, whose wildly ambitious growth targets have yet again been revised down. We have long predicted a decline for conventional gilts because they are overpriced given the fundamental problems in the UK. That could be exacerbated should foreign investors lose trust in our data and confidence in the government to resuscitate the economy – this becomes more and more likely with each downward revision.

View The Scotsman's Wealth Matters supplement online here.

This content was generated prior to Turcan Connell Asset Management Limited operating as Tcam.