The London Stock Exchange fell 3% on Thursday as investors worried about the UK economy after a fifth consecutive interest rate hike by the Bank of England, which expects inflation to rise to 11% this autumn.
At around 14:10 GMT, the FTSE 100 index of London-listed major stocks fell exactly 3% to 7,055.20 points.
“Concerns about the impact of spiraling prices and the economic slowdown on businesses and consumers are raging,” said Susannah Streeter, analyst at Hargreaves Lansdown.
The Bank of England (BoE) on Thursday announced a fifth consecutive hike in interest rates to a new record since 2009 in a bid to fight inflation.
This rose to 9% in April, a 40-year record, and the BoE now expects a peak of “more than 11%” over a year in October when the regulated cap on electricity prices is reviewed.
As in the United States or the Eurozone, prices are also increasing in the UK due to the disruption in production chains caused by the COVID-19 pandemic and the increase in energy prices since the start of the invasion.
But the country, which began raising interest rates in late 2021, is also facing a slowdown in growth, with a second straight monthly contraction in economic activity in April.
The BoE is now forecasting a 0.3% contraction in Q2 GDP, where it forecast a 0.1% rise in May, a decline that comes on top of a contraction already forecast for the economy’s last three months.
This bleak outlook is already reflected in more cautious consumer spending. Budget online clothing retailer Boohoo fell 13% and its rival Asos fell 29% after quarterly sales collapsed as they soared during the pandemic.