The end of England's FIFA World Cup dreams was probably its
lowest point in recent times. Its exit from the from the world's
biggest sporting event may have also hurt the economy to some
extent. This is because the World Cup had provided a boost to
retail and leisure spending. Sales of sporting goods and
merchandise, TVs and spending on food have all been hit. But the
bigger picture is much brighter. Recent data indicates that
England, and the UK in general, is making a steady and balanced
The final estimate for first quarter GDP reveals that the economy
expanded at 0.8% during the period. This is lower than consensus
expectations of a 0.9% increase. However, official data indicates
that growth has been far more balanced than earlier estimated.
According to the latest numbers, manufacturing expanded at 1.5% in
the first quarter. This is higher than the earlier estimate of
1.4%. Revisions for construction activity were more significant.
The sector increased by 1.5%, compared with the earlier estimate of
Business Investment and Services
Business investment also nearly doubled, increasing by 5%, compared
with the earlier estimate of 2.7%. This means that productivity
could increase significantly in the future. It also means that the
economy's dependence on consumption expenditures had decreased.
Services make up nearly 75% of the UK's economic growth. The sector
grew by 0.8% during the first quarter, compared with the earlier
estimate of 0.9%. However it was still the biggest catalyst for
growth during the quarter. The sector had also expanded 3.1%
Current Account Deficit
The reduction in the current account deficit is another positive
for the UK. This figure has declined to £18.5 billion during the
first quarter from £23.5 billion in the previous quarter. A senior
economist at Capital Economics said though the deficit was still
significantly large, there was reason to believe that it would
continue to decline over time.
This is because poor returns from foreign investment may be a
temporary phenomenon. Investment income has declined primarily
because of low returns from overseas FDI. A large portion of these
funds have been invested in the Euro-zone. With a recovery taking
place in this region, earnings from FDI should also increase,
leading to a reduction in the deficit.
The UK seems to be making a steady recovery which is set to pick up
pace in the future. Below we present three stocks from the United
Kingdom which possess the potential to grow appreciably, each of
which also has a good Zacks Rank.
The Royal Bank of Scotland Group plc
) is the holding company of one of the world's largest banking and
financial services groups. Headquartered in Edinburgh, the group
operates in the UK, US and internationally through its two
principal subsidiaries, the Royal Bank and NatWest.
RBS has a large and diversified customer base and provides a wide
range of products and services to personal, commercial and large
corporate and institutional customers.
The Royal Bank of Scotland Group holds a Zacks Rank #1 (Strong Buy)
and has expected earnings growth of 147.70%. The forward
price-to-earnings ratio (P/E) for the current financial year (F1)
BT Group plc
) is one of the leading providers of communications services and
solutions. Its principal activities include the provision of
networked IT services telecommunications services; broadband and
internet products and services and converged fixed/mobile products
The company is a communications services provider in the UK, and
offers products and services to retail customers, small and
medium-sized enterprises and the public sector.
Currently the company holds a Zacks Rank #2 (Buy) and has expected
earnings growth of 15.50%. It has a P/E (F1) of 13.18.
Reed Elsevier plc
) is a company which provides professional information solutions.
The company operates through five business segments. These provide
a varied number of offerings such as risk analytics, technical and
medical information solutions, and legal, tax and regulatory
The company also provides marketing solutions and organizes
conferences and trade exhibitions. Reed Elsevier purchased UK-based
data services company Wunelli in May 2014.
Apart from a Zacks Rank #2 (Buy), Reed Elsevier has expected
earnings growth of 14.80%. It has a P/E (F1) of 16.92.
A well-balanced recovery on all fronts indicates that companies
based in the UK are good investment propositions. This is why these
stocks would make good additions to your portfolio.
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