Nearly £ 40 billion wiped out the value of British companies

Nearly £ 40 billion was wiped from the value of British companies yesterday when a ‘sorry cocktail’ of coronavirus and Brexit concerns spooked financial markets.

In a gloomy day for savers with pensions and other investments, the FTSE 100 index fell 1.7% while the pound sank below $ 1.34 after trading above $ 1.36 last week. .

The sell-off came as analysts warned that Britain was in the ‘middle of a perfect storm from both Covid-19 and Brexit’ as a trade deal with the EU remains elusive.

Drop in the ocean: Latest developments have caused optimism about the launch of Covid-19 vaccines to give way to fear that the crisis is far from over

The emergence of a new, fast-spreading variant of coronavirus has led to the introduction of level four restrictions in London and much of the South East that could last for months, hitting business and putting the economy on track for a two-fold recession. drop. Many countries in Europe and around the world have suspended travel from Britain in an attempt to protect themselves from the new strain.

And the French ban on the transport of goods from Britain has added to the chaos in ports, threatening the supply of medicine, food and even Christmas gifts.

Latest developments have caused optimism about the launch of Covid-19 vaccines to give way to fears that the crisis is far from over. Economists warned that new closures “may be the last straw for many companies.”

Investors are also increasingly concerned that Britain may exit the EU on January 1 without a trade deal as the talks hit the wire. Stefan Koopman, Senior Market Economist at Rabobank, said: “We are in the middle of a perfect storm from both Covid19 and Brexit. It is catastrophic since the entire island is isolated from the mainland and that has repercussions on the market ”.

The FTSE 100 closed 112.86 points lower to 6416.32, while the FTSE 250 fell 2.1 percent, or 424.18 points, to 19.692.11.

In total, £ 38.8 billion was removed from the value of companies in the FTSE All-Share index of publicly traded companies.

Although the FTSE 100 is up 28 percent from its March lows, it is still down nearly 16 percent since early 2020, putting it in its worst year since the 2008 financial crisis, when it fell 31 percent. .

Russ Mold, chief investment officer at AJ Bell, said: ‘Markets are rebounding from the latest twist in the coronavirus crisis. The emergence of a new strain in the South East raises the possibility of strict restrictions during an uncertain period as the UK rushes to vaccinate its population. ‘

The economy contracted in the first and second quarters of this year, putting Britain in recession. But production rose again in the third quarter when the first lockdown ended and business reopened, ending the recession. However, there are fears that the economy will contract again in the last three months of this year and the first three months of 2021, which means that the UK is back in recession.

Ruth Gregory, UK Senior Economist at Capital Economics, said that the ‘severe Covid19 restrictions’ introduced over the weekend by Boris Johnson ‘increase the possibility of a double recession.’