LONDON (Reuters) - UK shares faltered on Wednesday as banks and housebuilder stocks fell amid warnings about the impact of a no-deal Brexit on the struggling British economy.
The British government’s assessment of different Brexit options, reinforced by central bank governor Mark Carney’s warning of a heavy hit to the British economy in the event of a disorderly exit from the EU, were enough to keep investors cautious.
Acknowledging that any Brexit option would be worse for the economy than staying in the European Union, the government said leaving the bloc without any agreement with Brussels would weigh heavily on growth at least into the 2030s.
Britain risks a bigger hit to its economy than during the global financial crisis a decade ago if it leaves the European Union in a “disorderly” manner in March next year, the Bank of England warned in stress test reports after the close.
The BoE report pushed sterling down to end the day flat.
Housebuilders and bank stocks were the biggest drags on the FTSE 100 as investors shed stocks seen as most vulnerable to an economic downturn.
Mining shares .FTNMX1770 rose 0.8 percent as metal prices bounced back from their recent slide.[nL8N1Y33ER]
Banks .FTNMX8350, however, fell 0.4 percent.
Outside of politics, M&A and results drove the biggest moves.
Credit checker Experian (EXPN.L) eked out gains even after the European Commission raised concerns about its takeover of rival ClearScore, saying it could reduce competition in the industry. The shares were up 0.9 percent.
Among midcaps, Thomas Cook (TCG.L) fell again after its second profit warning in two months on Tuesday, dropping 3.9 percent.
Wealth manager Brewin Dolphin (BRW.L) fell 3.2 percent, one of the biggest declines on the FTSE 250, as analysts predicted downgrades to earnings as commission fees wane and costs increase, even after in-line results.
On the small-cap index, the eateries chain Restaurant Group (RTN.L) was the biggest faller, down 15 percent after its shareholders approved its proposed acquisition of noodle chain Wagamama.
AIM-listed wealth manager and financial adviser WH Ireland (WHI.L) also slumped 9 percent to its lowest since August 2013 after reporting a half-year operating loss and announcing the resignation of its director Daniel Cowland.
Investors’ view of British stocks has soured recently with underwhelming earnings and sluggish economic growth compounding the uncertainty of Brexit.
Britain’s top stock index looks set to claw back some ground next year after a bruising 2018, but gains will be much more muted than originally expected, brokers, fund managers and analysts predicted in a Reuters poll on Wednesday.
Reporting by Josephine Mason and Helen Reid; Editing by Kevin Liffey