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Election jitters add to mixed UK picture

Tuesday, April 14, 2015 - 02:11

UK retail sales hit a high in March, suggesting consumer morale has returned. But with another month of zero inflation and an upcoming general election, Britain's economic outlook is far from clear. Ivor Bennett reports

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A different leader, a different decade, but this was Thatcher through and through. David Cameron resurrecting the spirit of the Iron Lady as he launched the Conservative Party's election manifesto. If re-elected, the Prime Minister promised to extend the famous 'right-to-buy' scheme began by his illustrious predecessor. Allowing more than 1 million council house tenants to buy their homes at a discount. SOUNDBITE (English) DAVID CAMERON, BRITISH PRIME MINISTER, SAYING: "You've worked hard, you've saved, that home you live in, it's yours to buy, it's yours to own. The dream of a property-owning democracy is alive and we will help you fulfill it." The party faithful were certainly pleased. The policy helped Thatcher win three elections, and they hope it'll have the same effect. Cameron also promised to run a surplus by 2018, as the economy takes centre stage. Announcing their manifesto on Monday, Labour said they would cut the deficit every year. But despite the pledges, markets are nervous. Polls suggesting a hung parliament, all they see is risk says JP Morgan's Patrik Schowitz. SOUNDBITE (English) PATRIK SCHOWITZ, STRATEGIST, JP MORGAN ASSET MANAGEMENT, SAYING: "Yes, UK equities have underperformed but we could see more downside if we have a very very unclear outcome from the election. If we look at the last time we had a minority government in the UK in the 1970s, stock markets didn't take that very well at all, and so far we don't think the market has priced that in." Among consumers at least, confidence is high. Retail spending rose at its fastest annual rate in almost a year last month. Up 4.7 percent on March 2014. Another month of zero inflation has encouraged more spending. And while deflation may not yet be a threat, there are major concerns lurking. SOUNDBITE (English) PATRIK SCHOWITZ, STRATEGIST, JP MORGAN ASSET MANAGEMENT, SAYING: "The balance of payments in the UK does look pretty pretty weak so the fundamentals are in place for any weakening in confidence in the UK to have a major impact, at least on the currency." Sterling has already started to weaken Dropping to a five-year low on Monday as the election jitters kick-in.