The manager of the Invesco Perpetual Income and High Income funds (pictured) acknowledged he was “overly pessimistic” on the outlook for employment, business investment, and GDP growth a year ago, but said the economy will experience “more moderate” growth in the coming quarters.

Latest figures show UK GDP rose 0.7 per cent in Q3 – an annualised rate of 3 per cent – but Barnett believes “the best days of the recovery are probably behind us”.

“There could be a more moderate pace of economic growth from here,” he said.

“I believe the current UK economic outlook is okay but not fantastic. There is only modest additional credit being extended in the economy, wages are not growing very fast, and people’s sense of wealth is dependent, largely, on prices of goods, something which is outside their control.”

The manager also pointed to the rotation away from small- and mid-cap stocks in favour of larger companies this year as a potential sign that investors anticipate the recovery is losing steam.

While a pick-up in consumption growth may now be on the horizon, courtesy of falling food, fuel, and utilities costs, Barnett warned a European slowdown could hurt UK companies’ performance in future.

The UK market looks “fair value, bordering on expensive” overall, Barnett said, adding a lack of earnings growth remains a crucial headwind.

It is the potential for dividend growth which means UK equities still look attractive despite these obstacles, according to the manager.

He also pointed to the prospect of base rate rises as being a positive factor, given expectations the Bank of England will only hike rates gradually.

“The backdrop for equities […] is not bad because, when interest rates rise, the expectation is that they are not going to rise very fast, and that they will not peak at high levels,” he said.