UK equity market review: Uncertainty hits UK share prices

Share prices in the UK generally fell during July amid mounting concerns over the impact of a possible coronavirus “second wave”. An increase in infection rates in north-west England led the Government to impose new localised restrictions, while a surge in cases in north-east Spain prompted the Foreign & Commonwealth Office to amend its travel advice.


  • The Government implemented measures to support jobs
  • The number of UK COVID-19 cases exceeded 300,000
  • Brexit negotiations failed to make progress

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Share prices in the UK generally fell during July amid mounting concerns over the impact of a possible coronavirus “second wave”. An increase in infection rates in north-west England led the Government to impose new localised restrictions, while a surge in cases in north-east Spain prompted the Foreign & Commonwealth Office to amend its travel advice. The FTSE 100 Index fell by 4.4% during July, while the FTSE 250 Index declined by 1.5%. According to the World Health Organisation (WHO), over 302,000 cases of Covid-19 had been diagnosed in the UK by the end of July, with almost 46,000 deaths recorded.

“UK quoted companies issued 165 profit warnings during the second quarter”

During the month, the Chancellor of the Exchequer announced the Government’s Summer Economic Statement, which focused on supporting the labour market against the impact of the pandemic. Measures included a “Kickstart” scheme to fund traineeships and apprenticeships, and a temporary cut in VAT on food, accommodation, and attractions. According to credit ratings agency Fitch, however, the Chancellor’s announcement “underscores how the pandemic will keep upward pressure in the UK and elsewhere”. As a result, Fitch downgraded its prediction for the UK’s economic growth in 2020 from -7.8% to -9%. The UK economy shrank by 24.5% between February and May, but expanded by 1.8% during May itself, boosted by growth in the manufacturing and construction sectors.

UK quoted companies issued 165 profit warnings during the second quarter, according to EY, representing an annualised increase of 139%. Over the first six months of the year, one-third of companies cut their forecasts, with 84% citing the impact of the pandemic. The FTSE sectors issuing the most warnings in the second quarter were industrial support services with 17 warnings, media with 11 warnings, and ten warnings each from oil, gas & coal, investment banking & brokerage, and software & computer services. Looking ahead, EY believes that the pace of profit warnings should ease this summer; nevertheless, pressure on earnings is set to remain, and insolvencies are on the rise.

There appeared to be little progress in Brexit talks between the UK and EU during July. Michel Barnier, the EU’s chief negotiator, warned that an agreement appeared “unlikely”, citing the UK’s reluctance to “break the deadlock” on competition rules and fisheries. He urged both parties to reach a deal by October to ensure it can enter into force by 1 January.


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