UK stocks declined on renewed investor caution over the country’s weakening economic outlook, following data showing a sharper-than-expected contraction in April.
The FTSE 250, which is more closely tied to the domestic economy, dropped 0.6%, while the blue-chip FTSE 100 edged 0.1% lower after UK GDP shrank by 0.3% in April. Travel and leisure shares were hit hardest, falling 2.1% across both indexes as concerns over Britain’s economic trajectory weighed on sentiment.
Sanjay Raja, chief UK economist at Deutsche Bank, noted: “While the UK economy has shown resilience this year, we expect GDP growth to remain below potential in 2025, before gradually returning to trend in 2026.”
Neil Wilson, an analyst at Saxo UK, added: “The UK has the capacity for faster growth, but that depends on a supportive mix of fiscal and monetary policy — and right now, it’s unclear whether that’s in place. The prospect of tax increases is a major concern for investors.”
Still, Wilson pointed to some reasons for optimism. “The FTSE 100 isn’t strongly linked to the UK economy, unlike the FTSE 250, which is much more domestically exposed. Any slowdown, such as the weak jobs data seen on Tuesday, could prompt a more accommodative stance from the Bank of England, which may weaken the pound. Given the FTSE 100’s strong international earnings exposure, that could be a net positive.”
