December 2018
Newsflow and investor sentiment were dominated by Brexit in December. Having managed to agree a Brexit deal with the EU in November, Prime Minister Theresa May later took the controversial decision to postpone the “meaningful vote” on the deal, which had been scheduled for 11 December, amid widespread expectations that it would be voted down.
- Mid-caps underperformed blue-chips during December and over 2018
- HMRC issued “no-deal” advice to UK businesses
- Black Friday provided a boost for retail sales volumes
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Newsflow and investor sentiment were dominated by Brexit in December. Having managed to agree a Brexit deal with the EU in November, the government was subsequently found to be in contempt of Parliament for refusing to publish the full legal advice on the agreement. Prime Minister Theresa May later took the controversial decision to postpone the “meaningful vote” on the deal, which had been scheduled for 11 December, amid widespread expectations that it would be voted down. She warned: “Avoiding no deal is only possible if we can reach an agreement or if we abandon Brexit entirely”. The “meaningful vote” is set to be held before 21 January 2019 and, with less than three months to go until the Brexit date of 29 March, it is still unclear whether the deal will be approved.
“The European Court of Justice ruled that the UK could unilaterally cancel Brexit”
During December, HMRC issued updated advice to UK business on how to cope with a no-deal Brexit; elsewhere, the European Court of Justice ruled that the UK could unilaterally cancel Brexit without the consent of other EU member states. Leading UK business groups, including the Confederation of British Industry (CBI) and the British Chambers of Commerce (BCC) urged MPs to focus on reaching a deal, commenting: “Businesses have been watching in horror as politicians have focused on factional disputes … the lack of progress in Westminster means that the risk of a no-deal Brexit is rising”.
UK equity indices fell during December and over 2018 as a whole, and medium-sized companies – which tend to be more exposed to the domestic UK economy – performed more poorly than their larger counterparts. The FTSE 100 Index fell by 3.6% over December and by 12.5% over 2018, while the FTSE 250 Index fell by 5.3% during the month and by 15.6% over the year.
Retail sales volumes rose at a month-on-month rate of 1.4% during November as Black Friday provided a boost for activity. However, over the three months to November, growth was a more muted 0.4%. Clothing chain Bonmarché issued another profit warning and commented: “We believe that uncertainty surrounding Brexit is a significant factor affecting demand and, therefore, that it may not strengthen until the current period of heightened uncertainty ends”. Online fashion retailer Asos also issued a profit warning, citing the impact of heavy discounting and promotional activity across the sector.
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