With a matter of days left before the end of the transition period, the UK and EU finally reached a post-Brexit trade deal. UK companies will be able to continue to sell goods in the EU market without tariffs or quotas, although changes to paperwork and regulations could cause some disruption as businesses adapt to the new regime.
- The FTSE 100 Index had its worst year since 2008
- Concerns rose over the economic impact of lockdown measures
- The Government extended its furlough scheme
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With a matter of days left before the end of the transition period, the UK and EU finally reached a post-Brexit trade deal. UK companies will be able to continue to sell goods in the EU market without tariffs or quotas, although changes to paperwork and regulations could cause some disruption as businesses adapt to the new regime. However, the share prices of UK banks faltered on the news that no deal had been reached on financial services and, as a result, banks have lost the “passporting” rights that enabled them to trade across Europe.
“Optimism was dampened by the rapid spread of a new variant of the Covid-19 virus”
The Confederation of British Industry (CBI) welcomed the agreement, but warned: “Coming so late in the day it is vital that both sides take instant steps to keep trade moving and services flowing while firms adjust”. The deal provided a boost for UK share prices, but optimism was dampened by the rapid spread of a new variant of the Covid-19 virus. Following the imposition of tighter “Tier Three” restrictions on a large proportion of England, a large swathe of the population was subsequently placed under even more severe “Tier Four” restrictions. The Government extended its furlough scheme to the end of April 2021 in a bid to ease worries over the economic impact of those measures. By the end of 2020, almost 2.5 million cases of Covid-19 had been confirmed in the UK.
Vaccination-related optimism lifted UK consumer confidence during November, according to GfK’s Consumer Confidence Index. Although the index remained mired in negative territory, it has recovered from a low of -34 in May – and subsequent dips in September and October – to reach November’s level of -26.
UK equity funds experienced a year of two halves in 2020, according to the Investment Association (IA): during the first five months, retail investors made the most of falling share prices, putting £2.3 billion into funds invested in UK companies. It was a different story in subsequent months, however, as investors withdrew £3.8 billion from UK equity funds.
During December, the FTSE 100 Index rose by 3.1%, but the benchmark index ended 2020 14.3% lower and experienced its worst calendar year performance since 2008, when it fell by 31.3%. Meanwhile, the FTSE 250 Index climbed by 6% over the month, but declined by 6.4% over the year.
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