UK share prices rose strongly during November, driven up by mounting optimism over the development of Covid-19 vaccines and hopes that a Brexit trade deal will be reached before the transition period ends on 31 December.
- The UK economy emerged from recession in Q3
- Economic growth is not expected to return to pre-pandemic levels until 2022
- The new “tiered” system raised fears for hospitality and leisure companies
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UK share prices rose strongly during November, driven up by mounting optimism over the development of Covid-19 vaccines and hopes that a Brexit trade deal will be reached before the transition period ends on 31 December. Governor of the Bank of England (BoE) Andrew Bailey hailed the news of vaccine breakthroughs as “a big step forward … (that) will play a major role in lowering the level of uncertainty”. The FTSE 100 Index rose by 12.4% during November but fell by 16.9% since the start of the year; meanwhile, the FTSE 250 Index climbed by 12.3% over the month but declined by 11.6% over the year to date.
“Consumer confidence fell during November to its lowest level since the first wave”
Ahead of the end of England’s national lockdown on 2 December, the Government revealed a new system of regional tiers, which triggered fresh concerns over the outlook for the beleaguered leisure and hospitality sectors. Retail sales rose for a sixth consecutive month during October, rising by 1.2%. The Office for National Statistics (ONS) reported strong online activity as consumers started their Christmas shopping early; however, sales at clothing stores remained below their pre-Covid levels.
The UK economy achieved record growth and came out of recession during the third quarter, expanding at a rate of 15.5%. Looking ahead, however, economic growth is not expected to hold up against the effects of the second lockdown and the subsequent “tiered” restrictions; in his Spending Review, the Chancellor of the Exchequer warned that output is unlikely to recover to pre-pandemic levels until the end of 2022. According to GfK, the second lockdown “couldn’t have come at a worse time for the UK’s high street retailers”, and consumer confidence fell during November to its lowest level since the first wave of coronavirus.
The number of profit warnings issued by quoted UK companies over the first nine months of 2020 reached a new annual high of 524, compared with the previous annual record of 506 in 2001. According to EY, more than one-third of UK listed companies have issued a profit warning over the last 12 months as firms struggled to deal with the impact of the Covid-19 pandemic and ongoing uncertainty over Brexit. Nevertheless, profit warnings actually fell by 25% year on year during the third quarter, which tends to be the quietest period for corporate reporting.
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