BlackRock’s billions and signs of a fall in interest rates show it’s not all gloom for UK business
The mood around UK business has ranged from cautious to desperate in the past few months as the economy battles inflation, tax grabs, rising labour costs and the prospects of US tariffs.
Add in constant political pressures giving a bleak outlook and the stock market plummeting in early April on the back of those tariffs, and UK plc could be forgiven for thinking 2025 might become a year to forget.
But perhaps all is not as bad as it was beginning to appear, with some important signs giving relief and optimism to some businesses who got a share price backing boost thanks to the world’s biggest investor, BlackRock, building stakes in multiple companies.
And the most imminent boost will be a cut to interest rates.
The Bank of England meets on 8 May and a 0.25 per cent cut appears all but guaranteed at this stage. And back-to-back rates cuts are entirely possible, bringing the Bank Rate down to 4 per cent by summer.
It would be the first time since March 2023 that the interest rate returns to that level, easing costs for business owners with debt and perhaps allowing more consideration to investment on projects and other spending which could spark opportunities for the growth the economy desperately needs.
Some businesses already look well-positioned to capture that growth, believes Larry Fink, chief executive at BlackRock.
“[The company has] allocated more capital back to the UK tactically now with the belief that in the short run, the new administration is trying to tackle some of the hard issues,” Mr Fink toldThe Times. “I think the prime minister is articulating the needs of what we have to do. I have more confidence in the UK economy today than I did a year ago.”
Pointing to some of the financial institutions that had seen their share price hammered this year as the FTSE 100 dropped along with other major stock markets, Mr Fink explained how BlackRock had taken stakes in different sectors in the belief the selloff was overdone.
“So many of the UK stocks discounts were too deep, especially like in the banking system. Look at the rebound in the valuations of NatWest and Lloyds and how they bounced. We added to our positions across the board with the idea that we believe the market was discounting too much negativity. And we believe the negativity was probably not warranted,” he said.
Having seen a significant drop from 3 April onwards, the FTSE 100 – the biggest firms on the London Stock Exchange – have bounced back somewhat and now remain up more than two per cent since the start of 2025, even if they have collectively not reached March’s high points.
Interest rate drops – while affecting households in terms of mortgages, savings accounts and so on – also impact investing. That is in part due to lower guaranteed returns from cash or like-cash holdings, meaning more risk may be taken on in the form of stock market equities. Rising share prices help improve investor and business confidence, while consumers may then benefit from having more money in their own pockets if rate drops mean they pay less on mortgages and other debt.
There are further positives in other sectors.
Retail sales rose almost half a percent in the UK during March, and that came ahead of April when the rise to minimum wage kicked in meaning more money in some workers’ pockets.
Jacqui Baker, head of retail at RSM UK, said: “Glimpses of warmer weather and improving consumer confidence meant retail sales continued its upward trend in March. Sales volumes rose for the third consecutive month, reaching their highest level since July 2022. The first quarter of 2025 suggests consumer spending is slowly starting to return, which should provide some reason for optimism in the retail sector.”
Then there’s analysis from Barclays, showing both wage growth easing and contraction in employment. Both of these factors will further ease pressure on the Bank of England when it comes to deciding rates cuts.
Small wins they might seem, and with little impact of individuals, but as we so often see in businesses, it’s those small wins adding up continuously which lead to the potential to outperform.
Awful April might just be closing with reason to face May and beyond with a more careful measure of optimism.
