UK mid-cap shares fall amid political uncertainty

UK mid-cap shares fell on May 18 as concerns over inflation and political uncertainty surrounding Prime Minister Keir Starmer weighed on investor sentiment.

The FTSE 250 index dropped 0.59 per cent as of 10:55 am GMT, while the blue-chip FTSE 100 edged 0.16 per cent higher, Caliber.Az reports, citing Reuters.

Starmer’s deputy said the PM will not set out a timetable for departure, despite growing calls from Labour MPs for him to step down following a poor set of local election results earlier this month.

The political pressure has intensified amid speculation that Greater Manchester Mayor Andy Burnham could challenge for the Labour leadership after signalling interest in contesting a vacant parliamentary seat.

Investors are increasingly concerned that a potential leadership shift could lead to higher public spending and borrowing, adding strain to the UK’s already stretched public finances.

“The political centre of gravity is likely to shift left. And yes, there is ‌pressure ⁠to adapt the fiscal rules. But politicians across the spectrum are presumably acutely aware there are limits,” said James Smith, developed markets economist at ING.

Inflation concerns have also been amplified by ongoing disruption to shipping through the Strait of Hormuz, keeping oil prices elevated.

Brent crude rose 1.1 per cent and was on track for a third consecutive session of gains, supporting energy stocks, which rose 2.1 per cent.

Homebuilders fell 2.4 per cent, while higher-than-usual seasonal increases in UK house prices added to sector volatility.

Bank shares slipped 0.3 per cent despite government proposals to relax ring-fencing rules aimed at creating a “more agile and proportionate regime”.

Elsewhere, Centrica, the owner of British Gas, rose 2.8 per cent after a broker upgrade, making it the top gainer on the FTSE 100.

By Bakhtiyar Abbasov