Britain is dealing with the weakest growth figures in the G7 and a collection of cost-of-living pressures that are heaping more hardship on the poor and intensively squeezing the budgets of middle-income households.
At the same time, investor money has never flowed into the big UK companies as we are witnessing today. The Potsey 100 index
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It broke three records in two days over the past week, starting last Friday and hitting new highs on Wednesday and Thursday. It also comes after a difficult year of market uncertainty, with risk assets selling off and indices from the pan-European Stoxx 600 to the US S&P 500 to Shanghai’s SSE Composite. The increase in the Potsi index shows that despite pressures on the cost of living, it is also related to it.
Energy companies like Shell
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reported record profits and promised higher dividends to shareholders, which boosted their stock prices (with calls for higher taxes to support consumers struggling with high bills). Yesterday’s increase in the Potsi to an all-time high of 7,944 points was touched, among other things, thanks to increases in Standard Chartered, one of the many banks that recorded a jump in profits as a result of the high interest rate.
Meanwhile, the strong performance of commodity stocks also pushed the index higher as they benefited from rising prices, supply constraints and, more recently, the prospect of a reopening of the coronavirus in China. “The UK Potsey Index does not deal with the UK’s domestic economy,” said Janet Moy, head of market analysis at RBC Brewin Dolphin, noting that over 80% of companies’ income exposure comes from overseas. Moy said a combination of factors raised the index to a record, including the drops in sterling that helped those revenues abroad (in dollars); its great weight in energy, commodities and finance; And also the relatively strong performance of consumer products such as Unilever, and health products such as AstraZeneca
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Suzanne Streeter, senior investment and markets analyst at Hargreaves Lansdown, said that among other factors, the rise in the Potsi index could also be explained by glimmers of hope in the economic picture, such as the real estate company reporting a “modest increase” in new home orders. It also Pointing to signs that Europe can avoid recession and soften the energy crisis. Among the factors weighing on the UK public are interest rate hikes that increase borrowing costs, inflation of basic consumer goods and food of 16.7% and overall inflation above 10%.
A report published on Wednesday by the National Institute for Economic and Social Research claimed that Britain is expected to avoid a technical recession this year – although growth will be close to zero – but that one in four households will not be able to pay their energy and food bills in full, and middle-income households will face with a drop of up to £4,000 ($4,873) in disposable income. “It’s a cruel paradox that on the day the POTSI peaked, campaigners on behalf of up to 7 million people on lower incomes in the UK called on the government to extend the support given to them in relation to their energy bills,” he said Richard Murphy, Professor of Accounting at the University of Sheffield School of Management.
In March, the UK government is set to finalize a wide-ranging program of compensation for household energy bills that ran during the winter. It comes as many governments try to end fiscal support to rein in public spending, with the European Central Bank recently arguing that maintaining support packages risks keeping inflation at bay.
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