A survey conducted by spread betting company Capital Spreads has revealed that fund managers believe the UK economy to be in a state of stagflation, as stagnant growth and persistent inflation continue to undermine the UK economy.

The UK economy has hit a period of stagflation, according to a survey published today by Capital Spreads, amidst fears that low growth and high inflation are affecting the performance of the UK economy as a whole.

In the survey of 200 fund managers nationwide, it was demonstrated that those managing substantial holdings and with heavy exposure to the markets feel that the inflation problem, coupled with low growth throughout the economy, will persist, and will get worse before it gets better as international market pressures continue to drive prices upwards.

High global commodity prices, particularly for oil, have fueled stubborn inflation of more than twice the government’s target level, and above-target inflation has become the rule rather than the exception in recent months.

Coupled with low economic growth, as a result of cuts in public sector spending, low consumer confidence and ongoing borrowing difficulties for business, the economic outlook reflected in the survey remains modest to bleak, as the UK continues to slowly move out of recession.

Capital Spreads boss Simon Denham suggested that with the brunt of public sector cuts still looming, the channels through which growth can be driven are “difficult to see”, while inflation looks set to remain a considerable issue for the foreseeable future.