UK equity income market review: Brexit, trade… and the Coronavirus

In common with most major equity markets around the world, UK equity indices fell during January as concerns over the rise of Coronavirus outweighed optimism resulting from the signing of the “Phase One” trade deal between the US and China.

  • UK companies paid a record £110.5 billion-worth of dividends during 2019
  • £12 million-worth of special dividends were paid out
  • Demand for UK equity funds jumped in December

To view the series of market updates through January, click here


In common with most major equity markets around the world, UK equity indices fell during January as concerns over the rise of Coronavirus outweighed optimism resulting from the signing of the “Phase One” trade deal between the US and China. Meanwhile, after years of heated political debate, the UK finally quit the EU: Brexit took place at 11pm on 31 January, triggering the start of an 11-month transition period. 

“After years of heated political debate, the UK finally quit the EU”

The FTSE 100 Index and the FTSE 250 Index both fell by 3.4% during January. Having announced a 36% decline in profits, Royal Dutch Shell reduced the pace of its share buyback programme in order to concentrate on cutting its debts. During January, the best-performing FTSE industry sectors included leisure goods, household goods & home construction, utilities, and aerospace & defence. At the other end of the performance spectrum, the worst-performing FTSE sectors included fixed-line telecommunications, forestry & paper, and industrial metals & mining. 

During January, the yield on the FTSE 100 Index rose from 4.36% to 4.51%, while the FTSE 250 Index’s yield increased from 2.95% to 3.12%. In comparison, the yield on the benchmark UK gilt fell from 0.76% to 0.53%.

UK companies paid a record £110.5 billion-worth of dividends during 2019, representing a 10.7% increase on 2018, according to Link Asset Services’ Dividend Monitor. However, £12 billion of 2019’s total was attributable to special dividends, and underlying dividend growth was only 2.8% – the slowest increase since 2014. Looking ahead, dividend payments in 2020 are forecast to reach £102.7 billion – a headline drop of 7.1% and an underlying drop of 0.7% – dampened by a stronger pound and slower dividend growth from big payers in the mining and banking sectors.

Demand for UK equity funds staged a sharp recovery during December, following the Conservative Party’s decisive victory in the General Election. Against a backdrop of greater political certainty – particularly with regard to Brexit – demand for UK equities rose sharply and, according to the Investment Association (IA), the mainstream UK All Companies sector proved to be the most popular IA sector for the first month since March 2017, achieving its highest net retail sales since June 2013. The UK Smaller Companies and UK Equity Income sectors also experienced a sharp jump in demand, and UK Equity Income enjoyed its strongest month since May 2019.


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