UK equity markets closed largely flat on Tuesday, with the FTSE 100 (^FTSE) edging 0.09% lower as investors processed the political fallout from Prime Minister Keir Starmer’s resignation.
Markets remained cautious as attention turned to likely successor Andy Burnham and the potential direction of fiscal policy under new leadership.
Oxford Economics flagged concerns about the UK’s fragile financial position and what a Burnham administration might mean for government spending.
“Given the UK’s poor fiscal position, perceptions that Burnham might pursue looser fiscal policy, and fading short-end pressures, we expect the yield curve to steepen in the next few months,” Oxford Economics said.
The research group added that it does not currently anticipate major changes to its baseline economic forecast, offering some reassurance to investors watching the political transition closely.
On the macroeconomic front, Britain’s private sector output remained in contraction territory in June, driven primarily by sustained weakness in the services sector.
The S&P Global Flash UK PMI Composite Output Index fell to a 14-month low of 49.4 in June, compared with 49.7 in May and a market expectation of 50.6.
S&P Global Chief Business Economist Chris Williamson said: “A disappointing June ‘flash’ PMI indicates that the economy contracted for a second successive month, albeit at only a 0.1% rate and merely flat-lining over the second quarter as a whole.”
Adding to the gloomy economic picture, total new orders in the UK manufacturing sector declined sharply, falling to -45% in June from -41% in the previous month, according to the Confederation of British Industry’s industrial trends survey.
Order books have now reached their weakest level since 2020, well below the analyst expectation of -35%, signalling mounting pressure on British manufacturers amid subdued domestic and global demand.
Against this difficult backdrop, Bunzl (BNZL.L) stood out as the session’s standout performer, rising 5.60% to top the FTSE 100 after upgrading its first-half revenue outlook.
The distribution and outsourcing group cited encouraging volume growth, now guiding for revenue to increase 4% at constant exchange rates in the six months ending June 30, up from previous guidance of moderate growth.
Information analytics group Relx (REL.L) also traded higher, gaining 0.86% ahead of its interim results scheduled for July 23.
Deutsche Bank Research said: “Recent meetings with REL management underpinned our positive view on strategic positioning and trading.”
The bank added: “For 1H26E, we forecast good +7% LFL revenue growth… RELX looks well positioned to leverage its high-quality proprietary content and big model playbook, sitting on well invested big data infrastructure that LLMs/open market models would fail access or replicate.”