Welcome 'spend now worry later' stance in budget

Published  03 March 2021
   4 min read

Following the Chancellor’s budget, Trevor Greetham, head of multi asset at Royal London Asset Management (RLAM), comments:

“The Chancellor is right to support the economy with a very generous fiscal policy stance while social distancing remains in force. Tax revenues should recover strongly during the re-opening of the economy into 2022, which will help reduce the budget deficit to more normal levels, but debt levels will remain very high by post-War standards and we should expect some fiscal tightening over the next few years.

“A key lesson learnt from the austerity experiment after the 2008 financial crisis is that aggressive spending cuts can be self-defeating if they hamper economic recovery. This is a particular risk right now, as the Office for Budget Responsibility expects Brexit to create a greater long term drag on economic activity than Covid.

“In our view, inflation and financial repression, in the form of negative real interest rates, will play a major part in bringing debt levels gradually down to more sustainable levels. This means returns on cash and government bonds are unlikely to keep pace with inflation over the next few years, so it makes sense for investors to diversify more broadly, including real assets like UK equities, commercial property and commodities in their portfolios.”

About Royal London Asset Management (RLAM):

Established in 1988, Royal London Asset Management (RLAM) is one of the UK's leading fund management companies, providing investment management solutions to both wholesale and institutional clients such as not-for-profit organisations, local authorities and the insurance sector.

RLAM manages £164 billion of assets and employs 129 investment professionals as at 31 December 2021. It invests in all major asset classes including UK and overseas equities, government bonds, investment grade and high yield corporate bonds, property and cash.

For professional clients only, not suitable for retail investors.

Issued by Royal London Asset Management Limited, registered in England and Wales number 2244297; authorised and regulated by the Financial Conduct Authority. Registered Office: 55 Gracechurch Street, London, EC3V 0RL.

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