UK markets sink amid grim growth forecasts for inflation-hit Britain

Anna Wise, PA Business Reporter
·3 min read

UK markets slipped into the red on Tuesday after a stark report from the International Monetary Fund (IMF) warned that Britain will be the only major economy to plunge into recession this year.

The grim forecast from the group predicted that the UK will lag behind its counterparts in the G7 group of advanced nations, with even sanction-hit Russia expected to grow this year.

London’s leading indices all suffered losses on Tuesday with the gloomy outlook hitting investor sentiment.

The FTSE 100 declined, dragged down by losses for basic resources and energy firms like Weir Group, Anglo American and United Utilities Group.

It closed down 13.17 points, or 0.17%, at 7771.7.

Investors will also be keeping in mind forecasts for the US Fed’s interest rate decision on Wednesday, which is likely to impact the internationally-focused FTSE 100, and the Bank of England’s rate decision on Thursday.

Policymakers at both nations’ central banks are expected to hike up interest rates again, according to analysts.

Joshua Mahony, senior market analyst at online trading platform IG, said: “Investor sentiment remains uncertain in Europe, with the FTSE 250 particularly coming under pressure in the wake of an IMF report that forecast the UK to be the only nation they covered to contract in 2023.

“For the UK, the difficulty bringing inflation under control cannot be understated as a concern going forward, with the current 10.5% headline consumer prices inflation (CPI) figure standing in stark contrast to the US figure of 6.5%.

“Until we see UK inflation brought under control in a meaningful manner, there is reason to believe that the Bank of England will require a higher for longer approach to rates compared with the Fed.”

Elsewhere in Europe, the German Dax and French Cac were flat, closing just 0.01% higher.

Over in the US, its top indices started the day on a positive note with the S&P 500 up 0.64% and Dow Jones up 0.24%.

The pound was down by about 0.27% against the US dollar, at 1.2319, and also down by 0.27% to 1.1348 against the euro.

In company news, Tesco hit the headlines after revealing a shake-up of its stores that could put 2,100 jobs at risk. The firm said it will be reducing the number of management roles and closing its remaining counters and hot delis.

Separately, the supermarket giant announced it was buying the Paperchase brand after the stationery chain fell into administration.

Shares in Tesco dipped by 0.69% at close.

Lucky Strike and Camel cigarette maker British American Tobacco (BAT) warned of possible job cuts after announcing plans to restructure the business and merge its European and Americas divisions.

The changes could mean job losses for the firm – which employees more than 52,000 staff worldwide – as it hopes to streamline.

The FTSE 100-listed firm saw its share price edge up by 0.95%.

Meanwhile, shares lifted for Irn-Bru and Rubicon maker AG Barr after the soft drinks giant revealed its revenues had jumped by nearly a fifth over the past year.

Its share price closed 4.36% higher.

The biggest risers on the FTSE 100 were Johnson Matthey, up 88p to 2,256p, Diageo, up 109.5p to 3,520p, Compass Group, up 24.5p to 1,931p, Haleon, up 3.45p to 324.25p, and Coca-Cola HBC, up 20p to 1,961.5p.

The biggest fallers on the FTSE 100 were Ocado Group, down 36.4p to 646p, Rolls-Royce Holdings, down 3.38p to 105.74p, BT Group, down 3.35p to 105.74p, M&G, down 5.1p to 201.9p, and Weir Group, down 41.5p to 1,782p.

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