UK equity market review: UK shares joined February’s global sell-off

February 2018

UK share prices dropped sharply at the beginning of February amid mounting speculation that central bank policymakers – not only in the UK, but also in the US – might decide to increase interest rates more quickly than previously expected. The FTSE 100 Index fell to its lowest level in more than a year, but recovered slightly towards the end of the month.

  • Disagreements continued to hamper Brexit negotiations
  • Retailers remained under pressure
  • The outsourcing sector continued to feel the fallout from Carillion’s collapse

To view the series of market updates through February, click here


UK share prices dropped sharply at the beginning of February amid mounting speculation that central bank policymakers – not only in the UK, but also in the US – might decide to increase interest rates more quickly than previously expected. The FTSE 100 Index fell to its lowest level in more than a year, but recovered slightly towards the end of the month. Over February as a whole, the FTSE 100 Index dropped by 4%, while the mid-cap FTSE 250 Index fell by 2.7%.

“The FTSE 100 Index fell to its lowest level in more than a year”

Following the high-profile collapse of Carillion in January and a subsequent profit warning by Capita, the outsourcing sector remained largely out of favour during February. Since the start of the year, Interserve’s share price has fallen by more than 44%, while Northgate and Connect have dropped by 14.8% and 44% respectively. 

Telecoms and media company TalkTalk issued a profit warning during the month and cut its dividend until its debt levels have fallen. The FTSE 250 constituent also revealed plans to raise up to £200m through an equity placing. This move, however, drew some criticism from the Investment Association (IA), which pointed out that the scale of the placing – 19.99% of existing share capital – was double the accepted size of 10% and contravened agreed industry guidelines. 

US cable TV company Comcast unveiled a takeover bid for Sky worth £22.1 billion or £12.50 per share. The approach came more than a year after a bid from 21st Century Fox, which is still under scrutiny by the Competition & Markets Authority. 

The UK high street remained under pressure, and retail sales volumes remained subdued during January, rising at a monthly rate of only 0.1% and an annualised rate of 1.6%. In comparison, retail sales rose at an annualised rate of 2.4% a year ago in January 2017. Homeware and clothing retailer Laura Ashley issued a profit warning during February, citing ongoing market challenges and the impact of sterling’s weakness

The chief Brexit negotiator for the EU, Michel Barnier, warned that a hard border in Ireland would become “unavoidable” if the UK chooses to leave the single market and the customs union. M. Barnier also warned that a transition period for the UK government “is not a given” against a backdrop of ongoing lack of agreement between the EU and the UK over the terms of Brexit.