It marked the second consecutive quarter of economic contraction, after UK gross domestic product fell 0.1% in Q3 2023.

The slight fall in December was mainly attributed to persistently high inflation, structural weaknesses in the labour market and low productivity growth, alongside adverse weather conditions.

Marcus Brookes, chief investment officer at Quilter Investors, said: “These factors affected the performance of the services and construction sectors, which are the main drivers of the UK economy. Retail sales also declined sharply in December, in the face of ongoing high inflation and interest rates as well as changing buying patterns.

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“Some of these challenges are temporary and have already started to ease. The inflation rate held steady at 4% yesterday when many were predicting an increase. Over the coming months, we expect inflation to fall, potentially easing the pressure on UK households, and supporting the recovery of the consumer-driven economy.

“The key indicator to watch is inflation in the services sector, which accounts for the bulk of the UK’s economic activity and employment and reflects the strength of wage growth and consumer demand, which are crucial for the UK’s recovery. As inflation steadies and then reduces, the Bank of England is more likely to cut interest rates to stimulate economic activity and investment.

“The UK economy faces challenges and uncertainties, but it also has many strengths and opportunities. It has a dynamic economy with a skilled and flexible workforce, and the UK is expected to overcome many of the current difficulties and emerge stronger and more resilient in the future.”

Jeremy Batstone-Carr, European strategist at Raymond James, noted the data is evident of deflated activity across all key sectors of the economy, from manufacturing to service and retail as well as construction activity, which was negatively impacted by poor weather.

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“Nonetheless, while there is an impression of economic stagnation, brighter times surely lie ahead. As winter rolls away, the lagged impact of high inflation and interest rates will work its way through the economy and inflationary pressures will settle, allowing the Bank of England to lower the base rate come summertime,” he added.

Premier Miton CIO Neil Birrell was also upbeat, saying: “Given the modest nature of the contraction, we should not be overly concerned, but today’s figures are nonetheless below expectations.

“This number, on the back of better inflation data, may give rise to some concern over economic strength in the coming year. Most sectors of the economy were weak, but the optimists will point to the fact that there is plenty of scope to cut interest rates should the current trend in inflation and growth accelerate.”

This article was written for our sister title Portfolio Adviser

It is generally considered an investment style but, according to David Jane, manager in Premier Miton’s macro thematic multi-asset team, it can be reframed as an ‘output’.

In a commentary note, Jane explained this approach involves shifting the focus from the assets that are the fund’s inputs to the actual income it outputs.

“Most fund managers running income strategies conceive of income as an investment style, they believe that by favouring higher yielding shares, that may give them an investment edge over time,” he said.

“That has certainly been true for various periods in the past, although in recent years growth has been the dominant style.

“With growth outperforming income for an extended period, even income managers tended towards a greater growth bias, and the Investment Association obliged by reducing the income requirement on the income sectors.”

Jane said that in running the firm’s Cautious Monthly Income fund, the team avoids the typical bias towards higher yielding shares and bonds.

“We certainly do not target a yield for the fund,” he said. “We see income as the output on the fund not an input. The output we are seeking is not yield per se but an income stream that grows in line with inflation over time.

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“This allows us the flexibility to invest in any asset class or region to meet the fund’s overall objective, so long as the income and risk requirements are met,” Jane continued. “We do not even limit ourselves to equities and bonds and are happy to include such assets as commodities, even though they do not pay any income.”

Jane said this way of working is part of a wider aspiration to engage in ‘flexible thinking’ while managing money.

“Over the past decade or so this flexibility has served us well as growth as an investment style has been performing well, while income has lagged.”

He explained that having flexibility to invest in growth sectors and themes has enabled positive capital returns while still generating income. It is difficult to grow an income stream over time if the capital value of the fund is not also growing, he noted.

Turning to the outlook for the near term, Jane said his team believes now that bond yields are at more normal levels and inflation is back to stay, income as a style may again perform well.

“The previous decade or so was highly abnormal, particularly post global financial crisis. Rates were held abnormally low, and inflation was not an issue. This led to an environment where bonds and equities became negatively correlated and yields consistently fell.

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“Portfolio construction in this environment was relatively straightforward: combine growth equities with long duration bonds and all is well, during weak equity environments your bonds might bail you out.”

A different approach is now required though, according to Jane.

Under a ‘more typical regime’, equities and bonds are positively correlated and weak equity markets are more likely to be associated with periods of higher inflation, rather than deflationary recessions. In this environment a different approach may be required to construct an income portfolio, he said.

With bonds no longer a hedge to equity, a better hedge would be inflation beneficiary assets such as oil and commodities, as well as hard asset-based businesses in equity and property.

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Combining these with equity may be a less volatile strategy going forward than the 60/40 equity bond mix.

“History would suggest that if current conditions persist that not only may a growing income be an important demand from clients as inflation bites, but that income strategies may perform well compared to the recently favoured 60/40 and growth biased approaches,” Jane said. “Portfolio constructions may need to adapt, but this could very much favour an unconstrained income style.”

The Swiss financial group has named Philippe Turrian as head of client solutions and marketing and communication.

Turrian was most recently chief operating officer of Pictet’s wealth management division.

Evelyn Partners

The wealth management and professional services firm has welcomed Paul Morris to its financial services team in Bristol.

Morris, who joins as director, financial planning, was previously a client director at wealth management firm Brown Shipley, and he also had spells with HSBC Private Bank and Barclays Wealth in Jersey.

Robeco

Alexander Preininger has been named as global head of sales and marketing at the firm, effective 1 November 2022.

He joins from Amundi, where he was global head of institutional clients coverage.

Bovill

Matt Browne has joined the financial regulation consultancy firm as head of its wealth practice.

He joins from PwC, where he was a director in its risk and regulatory practice.

Nordea Asset Management

The asset manager has hired Jamie Hayes as director of UK wholesale distribution.

Hayes joins Nordea Asset Management from RBC Global Asset Management in London, where he worked within its European distribution team.

He replaces Paul Malpas, who is stepping into a new role developing the group’s presence in the Canadian market, alongside amplifying NAM’s sustainability credentials in Europe and beyond.

Hayes and Malpas will work closely together in the weeks ahead to ensure a smooth transition.

Franklin Templeton

The investment firm has named Heneg Parthenay as head of insurance Emea.

Heneg joins Franklin Templeton from Insight Investment, where he was head of insurance.

Federated Hermes

The firm has appointed Michalis Ditsas as investment director of fixed income.

He joins the firm from AllianceBernstein, where he spent two years as a fixed income investment specialist.

Premier Miton

The investment firm has announced that Andy Jackson, manager of the Premier Miton UK Value Opportunities Fund, is retiring at the end of the year.

This follows a 35-year career and 6 years with the company.

The management of the fund will pass to Matthew Tillett who will join Premier Miton Investors from Allianz Global Investors in October as fund manager.

Tillett was previously the lead portfolio manager on the Allianz Global Investors UK-listed Opportunities strategy.

The wealth manager has hired Sarah Ackland as global head of distribution.

Ackland joins from Liontrust, where she was head of multi-asset business.

Premier Miton Investors

Jonathan Willcocks has been appointed as global head of distribution at the investment firm.

Willcocks was most recently at M&G, where he spent 17 years, including as global head of distribution.

Lombard Odier

The private banking group has named Ivan Basa as managing director of its Spanish operation.

Basa is currently senior vice president of Lombard Odier’s Madrid office.

He succeeds José Couret, who will remain within the group as senior banker and adviser.

Prudential

The financial services company has hired Don Guo as group chief investment officer.

He joins Prudential from Catalina Holdings, where he was chief investment officer for Asia and Europe.

Progeny

The financial services provider has named Stewart Cape as head of corporate development.

In his new remit, Cape will take responsibility for informing and driving the acquisition activity of the business in line with Progeny’s strategic objectives for development and growth.

Cape spent 12 years at KPMG, where he led the financial services M&A practice for its northern corporate finance business.

Stonehage Fleming

The family office has appointed Stefan Flachsmann as group head of financial services.

He joins from UBS, where he was head of asset servicing Europe.

Generali Investments

Edi Aumiller has joined the firm as head of sales for Switzerland and Etienne de Boni joins the team as sales manager for Switzerland.

Aumiller was sales director at Franklin Templeton, while de Bonie previously worked at Franklin Templeton Switzerland as institutional client account manager.

Penfold

The pension provider has hired Steve Ayers as head of business development, according to his Linkedin profile.

Ayers was previously regional director at Quilter Financial Advisers.

Ashley Alder has been named as the chair of the UK regulator.

He is currently chief executive of the Securities and Futures Commission (SFC) in Hong Kong, a role he has held since 2011.
Alder is expected to take up his role as FCA chair in January 2023. He is appointed for a five-year term.

The SFC has said it will start a recruitment drive for Alder’s successor soon.

Also, the UK regulator has appointed Anthony Monaghan as director of retail and regulatory investigations, which he has been covering on an interim basis since April 2021.

Karen Baxter will also join the FCA’s enforcement team as director of strategy, policy, international and intelligence.

AllianceBernstein

The global investment manager has named Kate Burke as chief financial officer.

She assumes this role while maintaining her role as chief operating officer.

Burke succeeds interim chief financial officer Bill Siemers, who will return to his prior role as corporate controller and chief accounting officer and remain on the firm’s operating committee.

She has stepped down from her role as head of Bernstein Private Wealth.

Onur Erzan, AllianceBernstein’s head of global client group, has been appointed head of Bernstein Private Wealth, in addition to his client group role.

HSBC Asset Management

The firm’s global head of responsible investing, Stuart Kirk, has resigned.

Kirk became HSBC AM’s global head of responsible investing last July after joining the business in 2020.

Prior to this, he was a journalist for the Financial Times and worked for DWS.

Credit Suisse

The bank has named Roger Suter as head of private banking Switzerland.

Suter is currently regional head central Switzerland.

He will take over from Serge Fehr.

Premier Miton Investors

The UK firm has recruited Georgi Koutsoumbos from Jupiter Asset Management to become business development manager to its wealth management distribution team.

Koutsoumbos will be responsible for client relationships and business development with wealth managers in the Midlands and southwest.

He was previously regional sales manager for the Midlands at Jupiter, having spent seven years at JP Morgan Asset Management before that.

Quilter

Chris Fautley has stepped down as chair of Quilter Financial Advisers.

Fautley was previously chief executive of Charles Darby before its sale to Quilter.

Quilter said in a statement: “We thank Chris for his time with Quilter since the acquisition of Charles Derby in 2019 and for his help integrating the business as part of Quilter Financial Advisers. We wish him all the best for the future.”

Investec Wealth & Investment

Faye Church has been hired as senior financial planning director at the wealth firm’s Guildford office.

She joins Investec from Close Brothers Asset Management.

JP Morgan Private Bank

The group has expanded its Middle East and North Africa adviser team.

Yazeed Mohammed Alsubeaei and Ghadeer Yusuf have both joined from Credit Suisse and Citi Private Bank, respectively.

Evelyn Partners

The wealth management and professional services group has hired adviser Catherine Glennon to join its Cambridge financial planning team.

She joins from Tees Financial, the IFA arm of regional law firm Tees.

Cazenove Capital

The Schroders wealth management subsidiary has hired Stephen Wilson as a portfolio director.

He joins from UBS, where he spent over five years as a senior member of the Newcastle and Leeds team, working with high net worth clients across the north of England.

Colmore Partners

Simon Hoult has joined the business as head of proposition, with responsibility for supporting its continued growth and development.

He was most recently chair of the advice committee at Punter Southall and head of its financial planning team in London.

AAB Wealth

The advice firm has expanded into Northern Ireland with the appointment of financial planner Alastair Moore.

Moore, originally from County Down, Northern Ireland, previously worked for AAB Wealth for 5 years in Aberdeen before leaving to relocate home to Northern Ireland.