According to economists at AllianceBernstein, “the UK economy is falling apart”.
The evidence is everywhere, according to Bloomberg. Households are losing purchasing power, the cost of essential goods is soaring and business confidence is dismal. The pound is coming off its worst quarter since 2008 and sank below $1.20 on Friday.
While economic reports point to a global recession, the UK’s position looks particularly precarious. Goldman Sachs Group Inc. puts the odds of a UK recession at 45% over the next 12 months, compared to 40% for the eurozone and 30% for the US.
This bleak picture is keeping investors away from UK assets and stalling M&A activity. The currency strategist at Nomura Holdings Inc. Jordan Rochester has urged clients to short the pound with a bet that it will fall to $1.18 by early August.
“It is too early to believe that the pound is cheap enough to recover without some improvement in the UK’s growth outlook,” said Neil Weller, head of global currency strategy at JPMorgan Asset Management.