(FXP) U.K. Races to Bottom of Economies for Investors in Global Poll
By Mike Dorning
Jan. 23 (Bloomberg) -- U.K. Prime Minister Gordon Brown and his country are winning a race they would rather lose: to the bottom.
Global investors are more pessimistic about the U.K. than any other major economy and Brown gets overwhelmingly negative reviews, according to a global quarterly poll of investors and analysts who are Bloomberg subscribers. It shows that 66 percent of respondents are pessimistic about the investment climate in the U.K., which tops the list.
This downbeat attitude extends to Brown, whose government has produced record budget deficits and imposed a 50 percent tax on bank bonuses. Among global respondents, 62 percent hold an unfavorable view of him. Those numbers are even worse when it comes to respondents in the U.K. alone: 86 percent of British residents said they hold an unfavorable view of their political leader. That includes 63 percent who are very unfavorable.
In a list of nine global political, economic and financial figures, only one person does worse than Brown: former U.S. Republican vice-presidential candidate Sarah Palin.
“Brown is playing with fire,” said poll respondent Florian Broekhuizen, a portfolio manager for F Van Lanschot Bankiers NV in ‘s-Hertogenbosch, Netherlands. “The U.K. could face serious troubles the next couple of years, and as we have seen in Greece, when financial markets lose faith in the government, this is not good for the investment climate.”
Greek Sovereign Debt
Greece’s deteriorating finances prompted ratings companies to downgrade the nation’s sovereign debt last month, spurring a sell-off of its bonds. Investors in the poll listed Greek bonds as most likely to default this year.
In Britain, Brown and his chancellor of the Exchequer, Alistair Darling, have promised to cut the deficit in half by raising taxes on the rich while avoiding providing details of spending cuts. Brown’s Labour Party is trailing the opposition Conservatives by about 10 percentage points in domestic opinion polls as he faces a general election that must be held by June.
Over the next six months, 39 percent of poll respondents said they believe the nation’s benchmark FTSE index will decline and 26 percent believe it will rise. Another 28 percent say it will vary little.
Deteriorating Economy
A plurality of U.K. poll respondents, 45 percent, said they believe the economy in their country is deteriorating; 18 percent said it is improving. Among global respondents, more than twice that number said they see an upswing in their country’s economy.
In trading yesterday, the FTSE 100 slipped 32.11, or 0.6 percent, to 5,302.99, its lowest level in a month. The gauge, which has fallen 2 percent so far this year, is still 51 percent higher since March after more than $12 trillion committed by governments around the world boosted equity markets.
The quarterly Bloomberg Global Poll of investors, traders and analysts in six continents was conducted Jan. 19 by Selzer & Co., a Des Moines, Iowa-based firm. It is based on interviews with a random sample of 873 Bloomberg subscribers, representing decision makers in markets, finance and economics. The poll has a margin of error of plus or minus 3.3 percentage points.
London Mayor Boris Johnson said this month that as many as 9,000 bankers may leave the U.K. as a result of the tax on bank bonuses and a new 50 percent tax rate on the incomes of all British residents earning more than 150,000 pounds a year. Johnson said the result could be permanent damage to London’s competitiveness as a financial center.
Leaving London
In the poll, 81 percent of U.K. respondents said they believe some or most companies will leave the country because of higher taxes. Globally, 60 percent of all respondents said the same about their financial center.
The prime minister’s struggle to win re-election and protect himself from dissent within Labour is “becoming more important to Gordon Brown than controlling the budget deficit, building confidence in the consumers or controlling inflation,” said Andrés Caballero Gálvez, a fixed-income and equities trader at BT Casa de Bolsa in Caracas.
“The government needs to build a realistic plan to bring borrowing under control without negative impacts on the economic recovery,” he said.
Only 26 percent of poll respondents said they were optimistic about the investment climate in the U.K. About the same number said they were optimistic about Japan and 28 percent said so about the European Union. India topped the optimism list, with 70 percent, followed by Brazil, with 64 percent, and the U.S., with 58 percent.
Brown, 59, has been a consistently unpopular figure with international investors. In the current poll, 62 percent disapproved of his performance, up slightly from 56 percent who said so in October and 58 percent in July.
To see methodology and exact question wording, click on the attachment tab at the top of the story.
To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net.
Last Updated: January 23, 2010 00:01 EST
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