The FTSE100 index had fallen to its lowest close in 27 months by the end of trading Friday, with the worst hit being technology, media and telecom shares. The 2.9% drop, the equivalent of 39 billion pounds, brought the week’s drop to 6% and left the index at 5562.8, its worst since 15^th December 1998 when it closed at 5557.1. The index failed to rise above the significant 6000 level during the week, and dropped as low as 5471.1 in mid-session on Wednesday.
Losers included Vodafone down 3.9%, Autonomy down 14.4%, Sage down 13.8% and Logica down 13.1%, but it was not only the tech sector that suffered as international banking group HSBC lost 5.6% and GlaxoSmithKline ended 3.4% lower. Other indices showed similar losses, with the techMARK down 4.8%.

Many analysts have been surprised at the depths of falls in UK stock markets, and point to the continued strength of the UK economy as well as comfortable results from many companies, particularly those whose operations and profit-centres are primarily within Britain. Marks & Spencer shares climbed 4.3%, recovering from recent losses and on an "upgrade" to a "buy" rating from Deutsche Bank. Chubb also moved ahead by 6.2% on Friday (another Deutsche upgrade), and other winners included City North up 13.4% (upbeat statement), Eyretel up 19.2% (new orders), and L Gardner up 18.4% (bid approach). The view of a substantial number of experts remains that the falling share prices are largely unwarranted by the economic outlook in the UK, and are an over-reaction to stock market nervousness in the U.S. where a slowing of the economy is now causing major concern. Poor performance by Japanese markets and the view of many that the Japanese economy is faltering, has added to a worldwide lack of enthusiasm for shares. Dangers for the UK, however, may be greater than for the rest of Europe despite the UK economy itself being one of the strongest. Oxford Economic Forecasting reported that there is a much higher level of the UK’s total wealth held in equities than in almost any other country except the USA. They estimated that a 20% fall in value of the world’s stock markets for six months would result in Britain’s GDP reducing by 0.7%, which compares with an average of just an 0.2% reduction throughout the rest of Europe. They also suggest that an aggressive interest rate cut by the Bank of England would produce the rapid boost needed to raise both consumer spending and the much-needed market confidence.

For another week, the rest of the UK news has been dominated by foot-and-mouth disease. As the number of outbreaks shows no sign of decreasing, the government faces a revolt by farmers against their new policy of destroying animals both in locations bordering outbreaks and any that have passed through markets which are known to have also contained infected animals at any time. The government’s chief vet, Jim Scudamore, describes these animals as being "high risk" and the new rules will apply even if the animals have passed the normal incubation period for the disease and still show no symptoms. This action by the government has brought a dramatic change in the attitude of some farmers, with many now saying they will refuse to co-operate and some threatening to barricade their farms to prevent the slaughter of their animals. The farmers’ anger was heightened by news that the government is actively encouraging the public not to avoid tourist attractions in rural areas, and the opening of a massive ecological exhibit in Cornwall, the Eden Project, has added to their frustration. With foot-and-mouth infecting only cloven-hoofed animals but known to be spread easily by vehicles, people and almost any other animal, there is growing concern that the measures currently being taken are insufficient and incorrectly targeted. David Handley, spokesman for the pressure group Farmers for Action, said, "This government is making a complete and utter shambles of this and expects farmers just to stand back and watch their animals being destroyed".

With a General Election looming, a report by Hay Management Consultants for the government’s senior salaries review body has indicated that MPs salaries are substantially lower than those with "similar jobs" in both the public and private sectors. The report suggested that MPs should receive an increase in salary of £2000 a year for the next two years, which would be additional to the 3% increase MPs will receive next month.
It would, of course, just be cynical to comment that if the MPs were in fact in the private sector, then most of them would have been sacked from their jobs a long time ago.

18th March 2001