London stocks suffered a sharp sell-off on Friday, with the FTSE 100 recording its worst session since the outbreak of the Iran conflict as political uncertainty and rising bond yields heavily pressured defensive utility shares.
The FTSE 100 closed down 1.9%, with major utilities among the biggest fallers. Severn Trent dropped 7.9%, while United Utilities fell 7.6%.
National Grid declined 7.1%, and SSE lost 6.7% as investors reacted to higher borrowing costs and concerns surrounding the UK political outlook.
The more domestically focused FTSE 250 also ended lower, falling 1.3% amid broader weakness across UK equities.
Meanwhile, London’s junior market reversed recent gains, with the AIM All-Share Index falling 1.12% to 807.95, ending its recent winning streak.
Investor sentiment across smaller-cap stocks was dented by escalating political instability surrounding Prime Minister Keir Starmer, as growing speculation over Labour leadership tensions spread through broader UK markets.
Utility stocks endured their worst trading session in two years on Friday as investors reacted sharply to escalating political uncertainty following Andy Burnham’s move towards a potential leadership challenge in Westminster.
Shares in major UK gas, electricity and water providers plunged by as much as 7.6%, marking the sector’s steepest one-day decline since May 2024.
Defensive infrastructure stocks came under heavy pressure as bond yields surged, with investors increasingly concerned that a change in Labour Party leadership could bring higher public spending, tighter regulation and increased pressure on utility profitability.
Among the biggest fallers were Severn Trent, United Utilities, National Grid and SSE.
The sharp sell-off reflected the sensitivity of utility companies to rising borrowing costs, given the sector’s heavy reliance on long-term debt financing and stable regulated returns.
