Share prices fell during January as an unexpected uptick in the rate of UK consumer price inflation dampened optimism over the likelihood of interest rate cuts. The FTSE 100 Index fell by 1.3% over the month, while the FTSE 250 Index declined by 1.7%.
- Annualised inflation rose for the first time since February
- The UK economy grew by 0.3% in November
- UK listed companies paid out almost £89bn in dividends in 2023
UK equities fall in January: share prices fell during January as an unexpected uptick in the rate of UK consumer price inflation dampened optimism over the likelihood of interest rate cuts. The FTSE 100 Index fell by 1.3% over the month, while the FTSE 250 Index declined by 1.7%.
“56% of UK companies anticipate an increase in revenues over the next 12 months”
Inflationary pressures bite once again: having fallen every month since February 2023, the annualised rate of inflation rose in December from 3.9% to 4%, driven up by higher costs for alcohol and tobacco. The news curbed expectations of an imminent cut in interest rates and pushed up gilt yields. Core inflation – which strips out volatile factors such as alcohol, tobacco, food and energy – remained unchanged at 5.1%. Although food price inflation has eased, the British Retail Consortium retained a cautious outlook, highlighting the risks posed by cost pressures, including higher business rates and disruption to shipments going through the Red Sea.
UK economy rebounds in November: the UK economy expanded by 0.3% during November, following a 0.3% contraction in October. The International Monetary Fund maintained its forecast for UK economic growth this year at 0.6%, but cut its 2025 forecast from 2% to 1.6%. Business confidence shows signs of improving, according to the British Chambers of Commerce , which reported that 56% of UK companies anticipate an increase in revenues over the next 12 months.
Bank dividends bounce back: underlying growth in dividends paid by UK listed companies during 2023 rose by 5.4% to £88.5 billion, led by payouts from banks, oil, and utilities companies. According to Computershare’s quarterly Dividend Monitor , the banking sector was the highest-paying sector for the first time since 2007. Looking ahead, Computershare expects underlying dividend growth to moderate to 2% in 2024, representing a total payout of £89.8 billion.
2023 profits warnings outstrip 2008: although the number of profits warnings issued by UK listed companies in 2023 was lower than 2022 – falling from 305 to 294 – the proportion of companies publishing profits warnings in 2023 exceeded that of 2008, during the Global Financial Crisis. According to EY-Parthenon , 18.2% of listed companies published profits warnings last year as higher borrowing costs, supply chain disruptions and fragile consumer confidence took their toll. The sectors issuing the most warnings were industrial support (25 warnings), retailers (24) and software & computer services (21).
To view the series of market updates through January, click here
