UK share prices continued to rally during May as investors became more hopeful that the lockdown would lift, and the economy could restart. Prime Minister Boris Johnson confirmed that retailers selling non-essential items would be allowed to open from mid-June.
- Mid-caps outperformed blue-chip stocks in May
- Government borrowing rose to a record £62.1 billion
- Retail sales plummeted in April
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UK share prices continued to rally during May as investors became more hopeful that the lockdown would lift, and the economy could restart. Prime Minister Boris Johnson confirmed that retailers selling non-essential items would be allowed to open from mid-June. Car showrooms and outdoor markets could reopen from 1 June, and different households can meet in small, socially distanced groups from the beginning of June. As social distancing measures are lifted, the Confederation of British Industry (CBI) expects the UK to experience a “significant economic contraction, followed by recovery”. By the end of May, the World Health Organisation (WHO) had confirmed 272,830 cases of COVID-19 in the UK, with 38,376 deaths recorded.
“Companies have continued to come under pressure to scrap dividend payments”
As the UK Government increased spending to alleviate the impact of the pandemic, Government borrowing rose to £62.1 billion during April, reaching its highest level in any month on record. Concerns rose over the prospect of a surge in redundancies once Government support for businesses is withdrawn.
During May, the FTSE 100 Index rose by 3%, while the FTSE 250 Index climbed by 3.6%. Medium-sized companies performed particularly well as investors turned to domestically focused businesses that are perceived likely to benefit as the economy reopens. Since the start of the year, the FTSE 100 Index and the FTSE 250 Index have fallen by 19.4% and 22.1% respectively, and companies have continued to come under pressure to scrap dividend payments.
Having fallen by 5.2% in March, retail sales volumes plunged by 18.1% during April, achieving their steepest monthly drop ever recorded. Meanwhile, the proportion spent online surged to an all-time high of 30.7%. Commercial property company Land Securities expects rent receipts from retail tenants to fall by up to 75% over the next year, while rent receipts from office tenants could decline by 20%. Elsewhere, property company British Land reported a £1.1 billion full-year loss that was exacerbated by its exposure to the struggling retail sector.
According to a survey undertaken by the Bank of England (BoE), the pandemic has superseded Brexit to become the biggest threat to the UK economy in the eyes of the British public. During the month, the Department for International Trade unveiled the new UK Global Tariff, under which around 60% of trade will enter the UK tariff-free from 1 January 2021 when the Brexit transition period ends.
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