UK share prices plunged during March as the coronavirus continued to sweep the world. Shops, schools, leisure facilities and workplaces were forced to close as a lockdown was imposed in the UK to stem the spread of the virus.
- UK companies reinforced their balance sheets by scrapping dividends
- The FTSE 100 Index fell by almost 25% over Q1
- The Government announced measures to shore up the economy
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UK share prices plunged during March as the coronavirus continued to sweep the world. Shops, schools, leisure facilities and workplaces were forced to close as a lockdown was imposed in the UK to stem the spread of the virus, and UK companies took steps to reinforce their balance sheets, cancelling dividend payouts and share buybacks, and postponing non-essential capital expenditure. In particular, the UK banking sector came under intense pressure to bolster their finances by scrapping dividend payments and, as March drew to a close, the major lenders agreed to cancel their payouts.
“The Bank of England announced two emergency cuts in interest rates”
According to the World Health Organisation (WHO), 22,145 cases of Covid-19 had been diagnosed in the UK by the end of March, with 2,619 deaths recorded. The FTSE 100 Index fell by 13.8% over March and by 24.8%% over the year to date. Meanwhile, the FTSE 250 Index fell by 21.9% over the month and by 31% over the quarter.
The Government announced a range of measures designed to shore up the UK economy against the impact of the coronavirus. The initial measures were announced in the Budget, and included greater access to Statutory Sick Pay and support for medium-sized and smaller business. Later in the month, Chancellor of the Exchequer Rishi Sunak went on to announce a package of additional stimulus measures worth £350 billion – including a business rates holiday, support for companies in the retailing, hospitality and leisure sectors – and provision for the self-employed.
The Bank of England (BoE) announced two emergency cuts in interest rates that reduced its key interest rate from 0.75% to 0.1%, representing its lowest level since the central bank was established in 1694. The BoE also extended its programme of quantitative easing measures. The central bank predicted a sizeable fall in global economic growth in the first half of 2020, warning of a “very sharp reduction in activity”, and pledged to expand its economic stimulus further if necessary.
Retail sales plunged in March, according to the Confederation of British Industry (CBI), with retailers expressing the most pessimism since April 2009. Although sales in food shops rose steeply, boosted by stockpiling activity, purchases of non-essential items declined. Retailer WH Smith issued a profit warning, while shopping centre operator Intu and cinema operator Cineworld both reported that they were at risk of breaching their debt covenants.
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