UK equity income market review: “Hope dies last”

Having tried – and failed – to get her Brexit deal through the House of Commons three times, Prime Minister Theresa May was obliged to seek an extension to the Article 50 process. Brexit Day was postponed from 29 March to 12 April; however, there is a growing possibility that the extension will in turn be extended, forcing the UK to take part in European Parliamentary elections. 

  • The EU is “fully prepared” for no deal
  • Investors are digesting the possibility of a General Election this year
  • The retailing sector remained under pressure

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Having tried – and failed – to get her Brexit deal through the House of Commons three times, Prime Minister Theresa May was obliged to seek an extension to the Article 50 process. The third vote had focused on the Withdrawal Agreement, separating it from the Political Declaration in order to put it to MPs once again. Mrs May warned: “I fear we are reaching the limits of the process in this House”, exacerbating speculation that a General Election could be round the corner. Brexit Day was postponed from 29 March to 12 April; however, there is a growing possibility that the extension will in turn be extended, forcing the UK to take part in European Parliamentary elections. 

 “”We are, as EU, prepared for the worst, but hope for the best” – EC President Donald Tusk

The European Commission said that the EU was “fully prepared for a no-deal scenario”, but reiterated that the benefits of the Withdrawal Agreement – including the transition period – would not be forthcoming in the event of no deal. European Council President Donald Tusk said: “We are, as EU, prepared for the worst, but hope for the best. As you know, hope dies last”. The FTSE 100 Index rose by 2.9% during March, while the FTSE 250 Index fell by 0.3%.

The British Retail Consortium (BRC) warned that UK businesses were “paying the price of the political uncertainty” surrounding Brexit. Retail sales rose at a monthly rate of 0.4% overall during February, although sales in food stores posted their largest monthly fall since December 2016, falling by 1.2%. On an annualised basis, retail sales rose by 4% in February. 

Beleaguered department store chain Debenhams issued yet another profit warning during the month. Later in March, the company announced that it had managed to negotiate a £200 million refinancing facility with lenders. However, Debenhams’ relationship with its largest shareholder – Sports Direct, headed by Mike Ashley – is still a point of contention, and the company’s future remains uncertain. Elsewhere in the sector, clothing chain Bonmarché issued another profit warning early in the month, but was subsequently bought out in a mandatory takeover by Spectre Holdings Ltd. 

Although full-year profits at high-street retailer Next’s high-street shops fell by 7.9% last year, profits at its online business rose by 14.7%. The company said that growth in online sales represented “a long-term threat to our retail business but potentially a much larger opportunity for the group as a whole”.


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