There were a number of points of positive news flow for the UK during May. Although arguably still pretty pedestrian, the latest reported figure from the Office for National Statistics for economic growth showed an increase of 0.7% for the first calendar quarter of 2025. This was a faster rate of growth than had widely been forecast by market participants, so was received positively by the stock market. On the 8th of May, the Monetary Policy Committee (MPC) of the Bank of England also announced a cut of 0.25% in its Bank Rate. This was the fourth cut in the current easing cycle, taking the rate to 4.25%.
In addition to these, the UK signed three trade agreements during the month, with the EU, India and the US. While individually their short-term impact on the UK’s economic growth is expected to be modest, the deals signal a willingness to engage and aim for better relations with major trading partners.
On the more negative side, the rate of inflation picked up with the Consumer Price Inflation index rising to 3.5% in April. According to official data this was the highest rate since February 2024 and was mainly driven by sharp rises in household bills, higher food, vehicle duty and airfare costs. This is likely to temper, at least temporarily, the MPC’s willingness to reduce the Bank Rate further. Partly as a consequence of all these factors, sterling was strong and the Bank of England trade-weighted sterling index (a measure of sterling’s value relative to a basket of other currencies) rose to an eight-year high.
May was also a month with many companies reporting corporate results. Following encouraging updates, Intermediate Capital, SSP and Burberry were among the strongest contributors to our performance. Burberry is worthy of a special mention, not because its trading was strong – in fact it is still reporting declining sales in its stores – but the new Chief Executive can tangibly point to the start of a long-awaited turnaround. The shares responded by leaping 16% on the day of the results and increasing 43% over the month (source: Bloomberg).
Over the month of May, the total return on the FTSE All-Share Index was 4.1%, taking the total return to 8.6% for the calendar year to the end of May.
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