After a slight decline of 0.1% in the previous third quarter, the British economy has just confirmed an even more disappointing fourth quarter, with a quarterly decline of 0.3%. This shows that the British economy was in recession in the second half of 2023 and that growth in 2013 as a whole was barely 0.1%.
These figures, while not encouraging, reflect an economy with limited fiscal flexibility. The London authorities are restrained from implementing stimulus measures due to past fiscal imbalances, and inflation remains a concern. The Bank of England, in light of these factors, is adopting a cautious approach to interest rate cuts, a move that some members of its Monetary Policy Board advocate to maintain the credibility and stability of the world’s oldest central bank.
Investors are aware of this, and the UK 10-year rate, which had fallen to less than 3.5% by the end of 2023, has risen again, hovering around 4.0%.
The London Stock Exchange is much less concerned with the meagre form of the internal market. Primarily composed of companies whose footprint far exceeds the British Isles, the London market is reaching new heights.
However, given the lack of visibility, it is advised that only investors with limited risk aversion consider this market for their investments.
