The U.K. jobless rate hit its highest level in nearly five years and redundancies notched all-time highs, new economic data showed on Tuesday.
The unemployment rate in the U.K. in the three months to November rose 0.6% from the previous quarter to 5% — the highest level since mid 2016 — as the country plunged into a second national lockdown. The redundancy rate during that period reached a record high of 14.2 per 1000.
The International Monetary Fund downgraded its guidance on the U.K.’s economic recovery in its latest forecast on Tuesday, projecting 4.5% real gross domestic product growth in 2021 after an estimated 10% contraction in 2020. The IMF had previously forecast this year’s economic growth for the U.K. at 5.9% in October 2020.
But downbeat data didn’t stop London markets from joining the pan-European rally, reversing two days of declines. Stock gains in the U.K. fell below the 2% rise for Frankfurt’s DAX
and 1.5% lift for the CAC 40
“Equity markets are clawing back the losses that were witnessed yesterday. Sentiment is far more positive this morning even though the same fears persist. It looks like economic activity in many major European countries will remain under pressure in the near-term as tighter restrictions are in place,” said David Madden, an analyst at CMC Markets.
Travel stocks were among the winners in London, bouncing back from big losses on Monday that were spurred by reports that some travelers arriving in the U.K. will have to quarantine in hotels.
The government is expected to announce a detailed plan for new travel restrictions later on Tuesday or on Wednesday.
Any new travel restrictions would come as the U.K. pulls ahead of its European peers in the vaccination race against COVID-19. The country leads the world’s major economies in terms of percentage of the population vaccinated.
Around seven million people in the U.K. have received at least one of two vaccine doses, representing more than 10% of the population. The country is nearing the 100,000 registered COVID-19 deaths milestone.
“The U.K. has suffered greatly in terms of case numbers, but there is some hope on the horizon as the country has issued in excess of 7 million vaccinations, putting it miles ahead of Germany, France, Italy and Spain,” Madden said. “The upbeat mood in stocks today might be because a lot of negative news has already been baked into the markets.”
Publishing and education giant Pearson
led the FTSE 100’s rise into the green. Moving 5% higher, the stock continued its rally from Jan. 20, when it posted upbeat earning showing that the company had returned to sales growth.
Shares in British engineer Rolls-Royce
are down near 2%, paring losses of 10% after the open and continuing the downtrend from Monday. The group warned in a trading update that free cash outflow in 2021 will be around £2 billion ($2.7 billion) — more than expected.