The UK General Election proved to be a defining moment for Brexit in the UK as Boris Johnson’s decisive victory – with an 80-seat majority – paved the way for his Brexit deal to clear the House of Commons. During December, the FTSE 100 Index edged 0.1% higher, climbing by 12.1% over 2019, whereas the FTSE 250 Index rose by 5.1% in December and by 25.0% over 2019.
- While equity yields eased over 2019, gilt yields rose
- Medium-sized companies performed better than blue-chips over 2019
- UK dividend growth is lagging the global average
To view the series of market updates through December, click here
The UK General Election proved to be a defining moment for Brexit in the UK as Boris Johnson’s decisive victory – with an 80-seat majority – paved the way for his Brexit deal to clear the House of Commons. During December, the FTSE 100 Index edged 0.1% higher, climbing by 12.1% over 2019, whereas the FTSE 250 Index rose by 5.1% in December and by 25.0% over 2019. The British Chambers of Commerce (BCC) expects UK economic growth to slow from 1.3% in 2019 to 1% in 2020, dampened by political and economic uncertainty and representing its weakest growth since 2009.
“UK equity yields eased over 2019”
UK equity yields eased over 2019 as a whole. Over December, the yield on the FTSE 100 Index declined from 4.47% to 4.36%, having begun 2019 at 4.68%. Meanwhile, the FTSE 250 Index’s yield fell from 3.07% to 2.95%, after beginning the year at 3.39%. In comparison, the benchmark UK government bond yield climbed from 0.56% to end the year at 0.76%, having started 2019 at 1.26%.
Over 2019 as a whole, the best-performing FTSE UK sectors were leisure goods, technology hardware & equipment, construction & materials, electronic & electrical equipment, and financial services. The worst-performing sectors included automobiles & parts, oil equipment & services, industrial metals & mining, and fixed line telecommunications.
Water regulator Ofwat revealed its decision on the prices that the UK’s water companies can charge their customers over the next five years. The regulator intends to reduce the returns that the water companies are allowed to generate from their investments, which will drive down dividend payments. Ofwat reduced the cost of equity – which controls dividend payouts – from 4.5% to 4.2%.
Headline dividend growth rose to record levels during the third quarter of 2019, according to Janus Henderson’s Global Dividend Index, boosted by large special dividend payouts from Royal Bank of Scotland, and from mining companies Rio Tinto and BHP. However, the underlying rate of growth – which does not include special dividends – was substantially slower at only 0.6%, dragged down by a sizeable dividend cut from Vodafone, weakness in the pound, and a lack of dividend growth from major UK multinationals such as Shell and HSBC. On an underlying basis, Janus Henderson found that UK dividend growth continues to lag behind the global average.
A version of this and other market briefings are available to use in our newsletter builder feature. Click here