New GDP figures today showed the UK failed to grow during July, adding to pressure on Chancellor Rachel Reeves.
Economists highlighted the drag from previous hikes in taxes and possible further tax rises to come in the Budget.
Despite the performance, Bank of England policymakers are still expected to keep interest rates on hold next week.
FTSE 100 Live Friday
- UK economy flatlines
- Stores issue tax warning
- Exports to the US rise
Market update: FTSE 100 near record as miners rally, Ocado down 10%
09:52 , Graeme EvansThe FTSE 100 index moved to the brink of record territory today as stronger mining stocks helped offset more disappointment from the UK economy.
London’s top flight rose 0.3% or 27.94 points at 9325.52, close to the intraday record of 9357.51 and above the all-time high close of 9321.40 set on 22 August.
The improvement followed Thursday’s advance of 0.8% as global markets benefited from the release of in-line US inflation figures, which kept alive hopes for an interest rate cut by the Federal Reserve at its meeting next week.
The Bank of England is not expected to make a move next Thursday, despite GDP figures today showing the UK economy failed to grow in July.
UK retailers struggled as a result, with Marks & Spencer down 4p to 338.9p, Kingfisher 3.1p lower at 242.2p and Sainsbury’s off 2.6p to 304p.
However, mining stocks offered support to the FTSE 100 index as Glencore rose 2% or 6.25p to 304.85p and copper-focused Antofagasta lifted 32p to 2232p.
The continued strength of gold and silver prices helped Fresnillo to add another 62p to 2258p and Endeavour Mining by 40p to 2862p.
Other stocks on the risers board included British Gas owner Centrica, which rallied by 3.85p to 160.85p after Berenberg lifted its price target to 190p.
The bank said: “Centrica remains in a strong financial position, with net cash of about £2.5 billion providing the company with good flexibility to increase shareholder returns while also meeting its ambition to invest £4 billion from 2024 to 2028.”
The FTSE 250 index drifted 27.99 points to 9325.57, with Burberry down 4% or 41p to 1098.5p and Travis Perkins 22p cheaper at 558p.
Ocado sank 10% or 31.5p to 268.5p after US grocery partner Kroger reportedly told analysts that it planned to review its automated facilities.
Kroger currently has eight customer fulfilment centres (CFC), having formed its partnership with Ocado in May 2018.
Two new sites in Charlotte and Phoenix are due to go live in 2026, while Kroger recently ordered automated technologies to roll out across its CFC network.
WH Smith fell 15.5p to 670.5p after Berenberg cut its price target to 700p . The same City firm upgraded its estimate on airport caterer SSP to 190p, helping shares to lift 4.1p to 156.1p.
Trade figures show rise in exports to US
09:10 , Graeme EvansUK exports to the United States rose by £800 million to £4.7 billion in July, figures from the Office for National Statistics showed today.
This marked the highest level since March, before President Trump’s administration announced its major tariffs programme.
However, exports remained significantly below the £6.1 billion pre-tariffs peak after firms shipped goods to the US in large numbers in preparation for the shake-up.
FTSE 100 nears record high, oil stocks fall back
08:26 , Graeme EvansMining stocks have provided support to the FTSE 100 index, with RIo Tinto and Anglo American among those up by more than 1%.
London’s top flight is 0.2% or 21.34 points higher at 9318.92, compared with the intraday record of 9357.51 and the all-time high close of 9321.40 set on 22 August.
Among other risers, the continued strength of gold and silver prices helped Fresnillo to rise by 62p to 2258p and Endeavour Mining by 40p to 2862p.
Their gains were offset by weakness in the oil sector after the price of Brent Crude fell to below $66 a barrel. BP lost 3.35p to 421.6p and Shell dipped 6p to 2639p.
Defensive stocks weakened, with Tesco down 1.8p to 435.9p and AstraZeneca 28p lower at 11,928p.
The UK-focused FTSE 250 index improved to 21,734, a rise of 0.2% or 40.25 points in the wake of today’s flat UK GDP reading for July.
UK economy “stuck” but not broken - Treasury
07:57 , Graeme EvansIn response to the latest GDP data, a Treasury spokesperson said: “We know there's more to do to boost growth because whilst our economy isn't broken, it does feel stuck.
“That's the result of years of underinvestment, which we're determined to reverse through our plan for change.
“We're making progress: growth this year was the fastest in the G7; since the election, interest rates have been cut five times and real wages have risen faster than they did under the last government.
“There's more to do to build an economy that works for, and rewards, working people.”
Economy flatlines amid tax hikes
07:40 , Graeme EvansCapital Economics believes the soft performance of the economy in July probably isn’t enough to offset the Bank of England’s growing inflation fears.
It expects the Bank to keep interest rates at 4% for the rest of the year before cutting them to 3% next year once inflation starts to turn down again.
The consultancy said today’s figures show an economy still struggling to gain decent momentum in the face of the drag from previous hikes in taxes and possible further tax rises to come in the Budget.
However, it said flat July performance isn’t as bad as it first sounds given it followed a chunky 0.4% gain in June. This meant the quarterly rate, which is a better guide to the underlying trend, eased from 0.3% in June to 0.2% in July.
The consultancy said: “The economy is therefore still growing, just not very fast. The hikes in taxes for businesses that were announced in last October’s Budget and took place in April this year are undoubtedly playing a part.”
Deutsche Bank expects 2025 GDP growth to track around 1.2% before rising a touch to 1.3% next year. “Risks, we think, are skewed one way: to the downside.”
The bank added: “As the US trade war catches up with the UK, global headwinds will gather pace, weakening the UK’s external backdrop.
“Domestically, we also see some drag in the economy from higher inflation, budget uncertainty, and a still sluggish labour market. This should keep spending in check for a little while longer.”
Stores warn of closures due to business tax threat
07:27 , Graeme EvansSome of Britain’s biggest shops face a fresh wave of closures if the Government forces them into its proposed higher business rates tax band, industry leaders have warned.
The analysis by the British Retail Consortium (BRC) suggested that 400 large-format stores were at risk of closure if they were included in the Government’s new business rates surtax on premises with a rateable value over £500,000.
The BRC said “like all of retail”, these stores were already under pressure from soaring employment costs, high taxes, and rising rates bills, driving the closure of 1000 such outlets over the last five years.
UK economy flat in July - ONS
07:04 , Graeme EvansThe UK economy stalled in July, figures published by the Office for National Statistics showed today.
The flat performance, which was in line with City forecasts, followed growth of 0.4% in the previous month.
The three-month average rate was recorded at 0.2%, with the year-on-year level slightly below forecast at 1.4%.
The flat GDP performance followed a poor month for the industrial and manufacturing sectors after separate figures showed that output declined by 0.9% and 1.3% respectively.
Their weakness was offset by a stronger-than-expected month in construction after output rose by 2.4%.
FTSE 100 seen near record, Asia markets rally
06:59 , Graeme EvansThe FTSE 100 index is seen moving nearer to last month’s record close of 9321.40, with futures trading pointing to a rise of 0.3% at today’s opening bell.
London’s top flight yesterday advanced by 0.8% or 72.19 points to 9297.58 after global markets were given a lift by US inflation figures.
The annual rate of CPI rose in line with expectations from 2.7% to 2.9%, keeping alive hopes for an interest rate cut by the Federal Reserve at its meeting next week.
Wall Street benchmarks responded to the figures by setting fresh records, with the Dow Jones Industrial Average up 1.4%, the S&P 500 index 0.9% higher and the Nasdaq Composite ahead by 0.7%.
The momentum of the tech sector helped Japan’s Nikkei 225 rally by 1% in today’s session, while the Hang Seng index in Hong Kong improved 1.5%.
