The UK economy is amidst a prolonged period of subdued activity. This manifest quite strikingly in both the UK’s recent loss of its AAA sovereign credit rating and the acknowledgement in the 2013 Budget that deficit reduction targets have been pushed out despite tax rises and substantial capital investment cuts. With the Bank of England continuing to suppress bond yields, this weakness has been expressed in falling Sterling. An evolving risk is that the UK’s first major recession without a global reserve currency, a managed depreciation becomes unmanaged leading to stagflation.
Source : CBRE Global Investors