Widespread disenchantment among UK fund managers with the Labour government’s economic policies has been revealed in an industry survey.

A monthly survey by Merrill Lynch has found many more fund managers who believe the government’s economic policies have had a negative impact on UK equities since the party came to power in May 1997 than those with a positive opinion.

The survey showed that a net 38 per cent of UK fund managers believed the government’s policies on taxation, regulation and welfare have had a negative impact on equities.

A net 33 per cent said they believed that government fiscal policy, including public expenditure, had been detrimental.

However, a majority said the move to give the Bank of England independence to set interest rates and other aspects of monetary policy had been positive.

The findings are the latest sign of increased tensions between business and the government following criticisms from the Confederation of British Industry and other business bodies.

The criticisms were more muted among global managers, reflecting perceptions of the relative strength of the UK economy compared with other European countries, the survey concluded.

“Outside of monetary policy, government policy is seen as a significant negative for UK equities,” said Ian Stewart, Merrill Lynch’s chief European economist.

The UK Treasury, however, defended its record. “Since 1997 the government has met strict fiscal rules to ensure sound public finances [and] continues to take action to boost productivity, reduce unnecessary regulation and lock in fiscal stability,” it said.

The FTSE All-Share has gained 44 per cent since Labour came to power.

The survey also showed that a net 12 per cent of global managers agreed that global output had exceeded its long-term sustainable growth path, up from a net
3 per cent in March.

Mr Stewart said: “Investors are increasingly of the view that global output is above it’s long-term trend.”

However, the survey showed little change in fund managers’ overall views of the macroeconomic backdrop in spite of the sharp jump in stock markets.

The MSCI World index has jumped 3.7 per cent in the past month.

The Merrill Lynch survey was conducted among 216 fund managers, including 40 in the UK.

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