Kevin Adams, manager of the Henderson Overseas Bond fund said that cutting the budget deficit was crucial for long-term economic recovery.
Adams said: "I believe that a defining aspect for the next few years will be how developed countries tackle their budget deficit. If they do not address it, and allow their debt to GDP ratio to go over 100 per cent, the tipping point of economic sustainability will be reached. This is why countries like Greece and Portugal are suffering so badly at present."
Financial Express data shows that the FTSE All Share and IMA UK All Companies sector have recovered since the beginning of the financial crisis, albeit with high levels of volatility.
Performance of FTSE All Share vs IMA UK All Companies
Source: Financial Express Analytics
However in a recent poll, more than a quarter of respondents think that the effects of the October Spending Review will force the UK into another recession, on an even greater scale.
Weekly poll result
| Do you think the massive job cuts announced last week will result in a second, more profound recession? | % |
| Yes |
26.21% |
| No |
61.13% |
| Undecided |
12.66% |
Source: Trustnet. Poll conducted 25 October – 1 November, 782 respondents
Adams did concede that the government's plans hang in a delicate balance: "With these latest cuts, the government are walking a fine line. On one hand they are reducing debt further and increasing confidence, but on the other hand they are slowing down growth, and borrowing will inevitably decrease."
"Since confidence has increased, from one point of view they've done the right thing. However, the actual impact of these cuts remains to be seen."
Yet overall, Adams was optimistic.
"By the time the cuts take effect I think the economy will be sustainable. Looking at recent GDP figures, it seems the UK economy is a lot more resilient than commentators expected, and if these levels are sustained, another recession will be very unlikely.
"Even if this isn't the case, Mervyn King has said he is focussed on acting if growth slows down too much, in order to avoid an inflationary spiral. There is an understanding that the Bank of England will implement further quantitative easing if required."
Kerry Nelson, managing director of Nexus Independent Financial Advisers had a similarly positive outlook: "No I don't think we will fall into another recession, but of course there will be some short-term headaches. This was a necessary evil that had to happen.
"I actually expected the cuts to be far worse. The coalition had to react to what they inherited, and as a result the whole nation will have to bear the burden. But I think the private sector will push the economy forward a sufficient amount."
Head of investment at AFH Graham Toone was a little more tentative: "I think there are respected people on both sides of the argument. We would be more inclined to be optimistic, and feel that the economy will muddle through. A decision has to be made, and it is up to us to shape our portfolios in light of this decision."
"We just have to hope that business investment will pick up, and growth doesn't suffer too badly. Unfortunately at this point, it's very much a waiting game."
Claire Schooling, head of research at Chelsea Financial Services is concerned that an outside influence could push the economy over the edge: "I am concerned we could face a winter of strikes which won’t help the situation at all. The economy is in a very fragile state at present, and I fear that if anything else comes along, we could be in trouble."