Brexit uncertainties drive down share prices

August proved both busy and controversial for UK investors, and share prices remained unsettled throughout the month.

Politics remained firmly in focus as the prospect of a no-deal Brexit drew closer, driving down the value of the pound.

The FTSE 100 Index fell by 5% during August, while the FTSE 250 Index declined by 1.4%.   Speculation over the likelihood of a no-deal Brexit intensified towards the end of the month following the news that Parliament was to be suspended shortly after reconvening following the summer recess until 14 October.

The Brexit deadline is now less than two months away – on 31 October – and Parliament’s suspension would curtail MPs’ scope to prevent a no-deal Brexit.

Consumer spending growth fell to its lowest-ever level for the month of July as retailers remained under pressure. Retail sales rose by only 0.3% during the month. The British Retail Consortium (BRC) warned: “Many high-street brands … must contend with rising import costs, a multitude of public policy costs and ever-higher business rates”.

According to the Confederation of British Industry (CBI), confidence amongst UK retailers fell during August to its lowest level since the financial crisis.

General retailers issued more profit warnings than any other FTSE sector during the second quarter of 2019, according to EY.

The sector issued a total of ten warnings during the period, followed by chemicals, construction & materials, financial services, and support services, which all issued six warnings. EY highlighted the rising number of profit warnings “coming from industries exposed to increasingly unpredictable consumer, business or investor behaviour”.

Almost one in five warnings in the second quarter cited problems relating to Brexit as companies struggle to make plans against a backdrop of uncertainty.

Having previously warned on profits in March, software company and FTSE 100 Index constituent Micro Focus International issued another warning during August, blaming a “deteriorating macro environment”.

Elsewhere, shoe retailer and AIM constituent Shoe Zone issued a profit warning, blaming a “challenging environment” for the UK high street.

Assets in the investment company industry surpassed £200 billion for the first time, according to the Association of Investment Companies (AIC), reaching £200.3 billion at the end of July.

Assets reached £100 billion in January 2013, and 46% of the growth since then has been attributable to investment companies investing in alternative assets.

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