The UK equity market performed relatively strongly during July as the blue-chip FTSE 100 Index closed above 9,000 points for the first time. Over the month as a whole, the FTSE 100 Index rose by 4.2%, boosted by a strong contribution from the mining and pharmaceuticals sectors.
- CPI inflation rose to 3.6% YoY
- The UK economy contracted during May
- The government unveiled the “Leeds Reforms” during July
FTSE breaches 9,000: the UK equity market performed relatively strongly during July as the blue-chip FTSE 100 Index closed above 9,000 points for the first time. Over the month as a whole, the FTSE 100 Index rose by 4.2%, boosted by a strong contribution from the mining and pharmaceuticals sectors, while the FTSE 250 Index climbed by 1.6%.
‘“For too long, we have presented investment in too negative a light”’ (Rachel Reeves)
Support for UK financial services? During July, the government unveiled the “Leeds Reforms” , including measures designed to encourage UK savers to seek better returns by investing in the equity market with cash that would otherwise sit in low-interest savings accounts. Elsewhere, in the annual Mansion House speech, Chancellor of the Exchequer Rachel Reeves urged regulators “not to bend to the temptation of excessive caution”, observing: “For too long, we have presented investment in too negative a light, quick to warn people of the risks, without giving proper weight to the benefits.”
Possible changes to lending rules: as part of its response to the government’s call to identify areas where the UK’s financial sector could contribute more to sustainable growth without compromising stability, the Bank of England’s (BoE’s) Financial Stability Report recommended allowing lenders to increase lending to borrowers with higher loan-to-income ratios.
“A little weaker and more uncertain”: the BoE warned that uncertainty around the global outlook had increased, and that the UK growth prospects had become “a little weaker and more uncertain”. The UK economy shrank by 0.1% during May, dampened by a decline in manufacturing activity. The annualised rate of UK inflation rose from 3.4% in May to 3.6% in June, stoked by higher transport costs, and reaching its highest level since January 2024. Business confidence remains weak, according to the British Chambers of Commerce (BCC); sentiment has been undermined by rising employment costs alongside worries about taxation and inflation. The BCC urged the government to rule out any further business taxes in the autumn Budget. Meanwhile, GfK’s consumer confidence index found that sentiment deteriorated during July amid concerns over the possibility of tax increases.
An increasingly attractive destination? The UK’s relatively low 10% tariff deal with the US appears to have boosted its attractiveness as a destination for investment: according to Deloitte’s Q2 survey of chief financial officers, the UK was placed alongside India as the most attractive location for investment, ranking well ahead of Japan, the US and China.
