- Accountancy firm KPMG has forecasted that the country may witness a recession next year.
- UK's GDP growth is estimated to shrink by half this year and drop to 0.7% next year.
With inflation hitting decades-high levels and economic growth shrinking at a sharp pace, fears of recession have gripped the UK economy. Several experts and global organisations have already expressed concerns that a recession is imminent. The latest to join the list is the accountancy firm KPMG.
In its UK Economic Outlook report, KPMG said that the country could see a 'mild recession in 2023 triggered by the cost of living crisis.
The firm estimated the country's GDP to shrink by more than half to 3.2% this year and slip to 0.7% next year. This is because a decline in consumer confidence has put the brakes on discretionary spending. Without the government's support, business investment is likely to be weak next year, the report said.
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Headwinds against the UK economy
According to KPMG, three key headwinds could hit the UK economy. First is the potential recession in the US, a major trading partner of the UK, as the US Federal Reserve continues to tighten the monetary policy. Second, Eurozone is staring at a potential recession-type environment, largely due to the Russia-Ukraine crisis, which has led to interruptions in gas supplies from Russia.
The third is the cost of living crisis in the UK caused by the soaring prices, due to which people have reduced spending on non-essential items.
During economic uncertainties, investors generally prefer stocks of companies that provide essential products and services, as they are more likely to act as hedges to their equity portfolios. Let us check out some FTSE-listed stocks that are likely to perform better than others if a recession hits the UK economy.
Antofagasta plc (LON: ANTO)
The Chilean multinational is one of the world's largest producers of copper and also has interests in transport. It is listed on the FTSE 100. The company holds a market cap of £11,677.47 million as of 27 June 2022, and its share value has depreciated by over 16% in the past one year. The YTD return also stands in the negative territory at -9.71%. Shares of the miner were up by 2.03% at GBX 1208.50 at 2:19 pm GMT+1 on Monday.
National Grid Plc (LON: NG.)
National Grid is an energy and gas company that serves customers in the UK and the US. The company's share value has increased by 14.11% over the past year, but the year-to-date return hasn't been particularly good at -0.64%. With a market cap of £38,327.17, the company's shares were up by 0.19% at GBX 1,053.00 as of 11:54 am GMT+1 on Monday.
Centrica Plc (LON: CNA)
The British energy and gas company holds a market cap of £4,794.56 million, and its shares have given a return of 60.24% to the investors over the past one year. The year-to-date return currently stands at 15.44%. Shares of the Centrica were trading at GBX 82.62, up 1.8% as of 2:23 pm GMT+1 on 27 June 2022.
Note: The above content constitutes a very preliminary observation or view based on industry trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.