BRITAIN’S economy received another Brexit boost today as the key FTSE 250 index of companies all but wiped out the losses sustained in the uncertainty following the EU referendum vote.
The index temporarily soared above the highs it reached on June 23 during today’s trading, closing the day 1.15 per cent up as shares in household British businesses rocketed.
It has taken just a month for the FTSE 250 – which is seen as a key indicator of the health of the economy – to almost completely eradicate the losses it sustained as Britain was gripped by uncertainty following the Brexit result.
The FTSE 100 index of big blue chip companies also closed at a one year high, up 0.3p per cent on 6,750.43.
The welcome economic boost will be taken as yet another sign that the apocalyptic prophesies of Project Fear during the referendum campaign were overblown scaremongering.
Financial experts hailed the recovery as “impressive” and said it had been driven by a surge of confidence in the UK economy, prompted by better than expected GDP figures.
The FTSE 250, which includes household names like Balfour Beatty, Auto Trader and Debenhams, closed the day’s trading on 17,265.91 – just 0.2 per cent off its pre-Brexit levels.
At around lunchtime the index actually surged higher than it was before the referendum up to 17,362.07 – 0.16 per cent above where it closed on June 23 – as confidence surged in the British economy.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The UK’s mid cap index has staged an impressive recovery since the referendum, but there have still been casualties of the decision to leave the EU, with around a fifth of the names in the index showing double-digit price declines since the result was announced.”
And Connor Campbell, of SpreadEx, added: ”After initially seeming reticent to celebrate the arguably irrelevant, but still better than expected, second quarter data the FTSE began to break out a smile as Wednesday went on, rising by just over 40 points to graze 6,780.
“That finally growth finally saw the index hit a fresh 12 month high, circling levels not seen since just before the China slowdown-inspired issues dragged the global markets lower last August.”
The rise was in part fuelled by figures on the UK economy released today which revealed that it grew by 0.6 per cent in the second quarter up to the end of June.
The figures are significant because the domestically geared FTSE 250 is considered to be a much better barometer of the state of the British economy than the FTSE 100, which contains the big multinational companies.
About 52 per cent of revenue from the index’s companies is directly linked to the economy, compared to the roughly 28 per cent exposure for the big FTSE 100 giants.
Amongst the biggest gainers were the online estate agent Rightmove, whose shares bounced by 8.1 per cent after it said its board had “confidence in delivering expectations for the current year” despite Brexit.
The company said: “Rightmove’s trading in July has been in line with the strong monthly revenue achieved in the first half of the year.”
House building companies also received a welcome boost as investors continued to pile back into British companies now that the predictions of economic catastrophe have passed.
However, the pound continued its shaky performance trading at $1.31 and €1.1957, with the IMF warning the currency is still overvalued despite its post-Brexit slump.
The IMF said the pound’s level in 2015 was between five per cent and 20 per cent “above the level consistent with fundamentals and desirable policy settings”.
Sterling has fallen by around seven per cent against other major global currencies since the EU referendum result, something the IMF described as going “in the direction of reducing exchange rate overvaluation”.