Investor remain hopefully on the UK economy

In the UK, gains were fuelled by a renewed appetite for medium-sized and smaller companies during September as investors became a little more hopeful about economic prospects. The FTSE 100 index rose by 6.2% during the month and by 12.8% during the third quarter of 2010.

Despite worries over the possible effects of government spending cuts, share prices were boosted by a rise in corporate activity and growing optimism about the strength and sustainability of the global economic recovery.

UK retail sales dropped unexpectedly during August, registering their first fall since January, according to the Office for National Statistics. Sales at UK food retailers fell by 0.5% during August compared with July, while sales at “other stores” fell by a sizeable 2.1%. On a brighter note, sales at mail order and Internet retailers rose by 2.1% and department stores also posted gains.

John Lewis announced a 28% rise in pre-tax profits for the six months to 31 July, boosted by robust growth in its Waitrose and online divisions. Nevertheless, the company warned that the retail sector faces the “economic headwinds” of public spending cuts and higher taxes. Meanwhile, department-store operator Debenhams expressed caution about the level of consumer confidence.

High-street clothing retailer Next announced a 15% rise in first-half profits, while Laura Ashley expressed caution, warning the outlook remains “uncertain”. Sports retailer JJB Sports announced it had increased promotional activity after experiencing “more volatile” sales. Meanwhile, DIY retailer Kingfisher announced strong growth in profits that were underpinned by successful cost-cutting measures.

After posting a rise during August, UK consumer confidence fell more heavily than expected during September, according to market researcher GfK NOP, and the public became more concerned about the prospects for their own personal financial situation and for the wider economy.

The British Retail Consortium warned the Government of “potential collateral damage to the private sector” ahead of sweeping public spending cuts, but also highlighted that retailers are employing “thousands more people than a year ago”. The Confederation of British Industry believes the UK economy will expand more slowly than expected during 2011, as budget cuts get under way.

According to statistics released by the Investment Management Association during the month, funds under management reached their highest level on record during August. Equities proved to be the second highest-selling asset class, and the UK All Companies and UK Smaller Companies sectors experienced positive net retail sales during the month.








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