Share prices in the UK fell during September amid concerns that a surge in infection rates, accompanied by localised lockdowns, could undermine economic recovery. Both the FTSE 100 Index and the FTSE 250 Index fell to their lowest levels since May during the month.
- The UK and EU failed to agree a Brexit trade deal
- The Government unveiled its Job Support Scheme
- The UK economy expanded by 6.6% in July
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Share prices in the UK fell during September amid concerns that a surge in infection rates, accompanied by localised lockdowns, could undermine economic recovery. Both the FTSE 100 Index and the FTSE 250 Index fell to their lowest levels since May during the month; over September as a whole, they declined by 1.6% and 2.7% respectively.
“Good news on the economy is being crowded out by fears about the future” (Andy Haldane, BoE)
The Government revealed its Job Support Scheme, which is set to replace the furlough scheme. The new scheme, in which the Government and employers will top up the salaries of workers in “viable” jobs, will begin on 1 November. The Chancellor also extended a VAT cut from 20% to 5% for companies in the tourism and hospitality sectors until March 2021.
The UK economy grew by 6.6% during July but remained 11.7% smaller than its pre-lockdown level. Whilst acknowledging an “unholy trinity of risks from Covid, unemployment, and Brexit”, the BoE’s Chief Economist Andy Haldane cautioned against “Chicken Licken” worries about the economy, warning: “Good news on the economy is being crowded out by fears about the future”.
The UK and EU ended September without any resolution over a Brexit trade deal. While Minister for the Cabinet Office Michael Gove insisted that the UK would not remove sections in a bill that will contravene agreements laid out in the Brexit deal with the EU, European Commission Vice-President Maros Sefcovic reiterated: “The Withdrawal Agreement is to be implemented, not to be renegotiated – let alone unilaterally changed, disregarded or disapplied”, and urged both parties to “move into higher gear”.
The British Chambers of Commerce (BCC) reported that only 38% of UK firms have undertaken a Brexit risk assessment on their business in 2020, and 51% had not taken any of the eight steps recommended by the UK Government to prepare for changes in the movement of goods between the UK and the EU. Meanwhile, the British Retail Consortium (BRC) warned that a no-deal Brexit is likely to result in higher food prices caused not only by tariffs, but also by administrative and checking costs. Elsewhere, the UK and Japan agreed a post-Brexit trade deal that aims to increase trade between the two countries by an estimated £15.2 billion. Despite welcoming the deal, the BCC urged the UK Government to “redouble” its efforts to secure a Free Trade Agreement with the EU.
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