Neil Woodford’s election response: ‘I’m even more optimistic on UK’
The industry veteran said the new Tory-led administration, with support from the Democratic Unionist Party (DUP), will adopt a “more stimulative position”, which will be beneficial for UK economic growth.
“Theresa May does not have the mandate that she had hoped for – that, in my view, will mean that the new administration will embrace a looser fiscal strategy going forward – borrowing more and spending more. Overall, this will be positive from the perspective of UK economic growth,” Woodford said.
He added that an alliance with the DUP would mean a ‘hard Brexit’ outcome that the market has most feared would be less likely.
“In wooing an alliance partner, the Tories will have to offer some concessions and I would imagine the DUP will be keen to secure an open border with Ireland as an important part of those negotiations,” he said.
“Membership of the EU Customs Union could be seen as a minimum requirement if a deal is to be struck with the DUP and, in turn therefore, the probability of a softer Brexit outcome has risen. At the same time, the risk of a second referendum on Scottish Independence appears to have substantially diminished.”
The manager said “a lot of extreme conclusions” accompany unexpected political outcomes, but that “economically not a lot has changed”.
“From the perspective of my investment strategy, the election outcome requires no major changes. The fundamentals of the businesses within the portfolios remain very attractive. I remain cautious on the outlook for the global economy, but more positive about the prospects for the domestic economy than an increasingly bearish consensus.”