Reform private sector, urges Thomas

Governments must embrace supply-side reform to produce growth in an environment of high unemployment, according to Nigel Thomas, a fund manager at Axa Framlington.

In Spain, for example, where unemployment is running at more than 20%, he says the country should liberalise opening hours, encouraging retailers to open on more than just a few Sundays through the year.

This would stimulate more jobs in the service sector and tourist industries, with more than half on UK retail revenues generated over the weekend, for instance. (article continues below)

In his £2.1bn UK Select Opportunities fund, Thomas has been buying companies that can thrive against a background of what he calls “slugflation” – sluggish 1% GDP growth and above-trend inflation.

“This is not an unhealthy position for many international companies we hold,” he adds.

“Many of these companies adjusted to the credit crunch early and fast, and now have healthy balance sheets.”

He notes ongoing corporate activity in the FTSE 100, with BHP Billiton chasing Potash of Canada and News International trying to buy out its minority stake in BSkyB.

“We expect more activity in the coming year, as companies that cannot grow particularly well in low-growth economies, where governments are liquidating debt, will need to acquire market share, new products or new geographies,” adds Thomas.

He also highlights business adaptability as key in the current environment, with major change as a company like Tesco in the lastyear.

“It is now the largest retailer in Korea and probably has one of the fastest-growing banks in the UK, but the local food retail marketdominates analysts’ perceptions and feelings towards the company,” adds Thomas.