UK equities are below historical average valuations
Most UK equities slumped in 2022, making equity valuations attractive to investors. Oren Elbaz/

As the UK Chancellor of Exchequer Jeremy Hunt's first budget announcement looms, investors expect an innovation-friendly budget from the investment opportunities in the UK. Most of the UK equity market experienced a dip in 2022, making them attractive to investors as UK equities are lower than the historical averages and international peers.

Joseph Hill, Senior Investment Analyst, Hargreaves Lansdown, stated that investors expect an innovation or growth-friendly budget in 2023. This is because the UK stock market is utterly different from that of the global markets. The UK stock market includes more financial services and the oil and gas sectors than its international peers, therefore offering limited exposure to other areas like technology. Due to it being different and focusing less on the technology sector, the country's stock market is being tagged as an 'old economy' stock market.

Hill, however, noted that there are many innovations to be discovered in the domestic market and "if the growth-friendly policy predictions prove correct, this could be unlocked by Jeremy Hunt's first Budget announcement next week".

The senior investment analyst said aside from the biggest 20 stocks in the FTSE 100 Index, many of the UK equity markets had great falls last year, "with the small and mid-cap space bearing the brunt of the valuation de-rating".

He explained that 2022's route allows for enticing opportunities to invest in quality businesses "trading at valuations well below their historical averages and relative to international peers".

"These businesses are also more likely to be domestically focused – and therefore more likely to benefit from pro-growth Budget policies such as local investment zones where corporation tax is zero, and incentives to bring retired employees back into the UK workforce," the senior investment analyst added.

Hill mentioned that there is some belief that Hunt "will extend the super deduction which allows businesses tax relief on growth investment".

On ideas about UK funds for a pro-growth budget, Manager Richard Bullas is a specialist in investing in medium-sized UK businesses, those frequently observed to be running the "sweet spot" between maturity and growth potential. He aims to increase capital growth and income in the long run by investing in great quality companies, trading at "attractive valuations".

He chooses where to invest by considering both the advantages of individual businesses and the economic outlook. Bullas is a skilled UK investor and has the support of a team that is rated highly.

Managers Anthony Cross and Julian Fosh utilise "the economic advantage investment process" which has worked well for the investors' good over the years. According to them, they feel the driving force behind successful investing is to invest in companies with "a sustainable edge over the competition" that will enable them to gain "above-average profits" in the long run. The knowledgeable team, according to them, has benefited them, and their stock-picking skills "have the potential to drive returns in the future".

Whatever the Chancellor will announce is a good way for the UK equity market to gain more exposure to the wider market. The aim of the fund is to monitor the performance of the FTSE All-Share Index via complete replication. It does this by investing in all stocks in the index and in the same amount, aiding the fund to closely be the same with the performance of the benchmark. Given Legal & General's size, the fund is expected to continually track the index well later on, with the expertise running the index tracker funds.