With the economy rebounding and the vaccine roll-out gathering pace, experts are tipping the UK as an increasingly attractive place for investors to put their cash.

The UK has been unloved by investors ever since the Brexit referendum in 2016. But sentiment towards UK shares is changing as the economy begins to emerge from the pandemic. US fund manager GMO believes the UK will be the best developed world destination for investors in the next seven years, with British ‘value’ stocks of particular interest. Value stocks are companies that trade at share price levels noticeably below their fundamental factors such as dividend levels, earnings or sales.

Why? Firstly, GMO believes UK shares are undervalued. And secondly, it believes shares in other developed markets are overvalued to the point where investors may no longer be willing to pay the premium attached to them.

The S&P 500, for instance, reached an all-time high over 4,000 points on Thursday, 1 April. The UK’s investment case has also been bolstered by the fact its economy is bouncing back strongly from the pandemic.

An International Monetary Fund report on future economic growth release on 6 April said the UK was set to outstrip all other developed economies in 2022 – growing by 5.3% this year and 5.1% next year, higher than the US and EU. This would be the strongest annual GDP growth for the UK since 1988. The IMF says this predicted bumper bounce back from the coronavirus crisis is largely down to the Government’s spending blitz to support the economy and prevent long-term scarring. But there are other factors that make the UK an attractive destination for investors too. For example, one of the big drags on the UK’s collective share prices has been Brexit for the past half decade.

It would appear the country is putting this issue firmly behind itself as it has agreed a long-term deal with the EU at the end of 2020 and has already put pen to paper on other trade deals around the world. In the wake of Brexit’s finalisation, the UK is also trying to position itself as a future leader for tech company listings and attracting other new business to its valuable financial hubs. The Chancellor Rishi Sunak is looking at reforms to listing rules to make it easier for fast growing companies to float on the London Stock Exchange. The net effect of this, if successful, is that the UK could play host to some of the most attractive growing companies to invest in in the future.

There are however counter arguments to GMO’s position on UK markets. The FTSE 100 and 250 have performed admirably when considered over 12 months, but still sits relatively low compared to historic averages – it may be that the value drag caused by Brexit has become permanent.

It would require a significant bull run – and for the shine to come off other major nations’ markets -for it to outperform in growth terms. It is also an argument that GMO are not the first to make – for some time UK-focused fund managers have pronounced it to be the most-undervalued market in the world. The upswing has yet to materialise.

The make-up of the index is also an issue. It is not geared toward ‘growth’ in quite the same way, with many firms stronger in terms of dividend income rather than exponential growth. This is partly why Rishi Sunak wants to change the constituents of the FTSE with more tech, but how easy it would be to unseat the incumbents is unclear.

Of course, nothing is certain. While the aforementioned factors all play into a positive outlook for the UK, there are always going to be bumps along the road.

If you’d like to discuss your investment options in the UK or anywhere else more, don’t hesitate to get in touch with your adviser.