The FTSE 100 closed lower on Friday as UK retail sales plunged 2.7% in May, marking the steepest drop in 18 months, while falls in major oil and pharma stocks added pressure. These domestic economic concerns overshadowed tentative diplomatic moves in the Middle East, as investors grapple with geopolitical risks and signs of an economic slowdown.
London’s FTSE 100 index closed lower on Friday amid disappointing retail sales data and falls in major oil and pharmaceutical stocks, overshadowing some hopes for diplomatic progress in the Middle East. The index ended down 17.15 points, or 0.2%, at 8,774.65, after earlier reaching a session high of 8,847.28. Contrastingly, the FTSE 250 rose 0.4%, and the AIM All-Share edged up marginally by 0.1%. For the week overall, the FTSE 100 declined 0.9%, while the FTSE 250 and AIM indexes posted slight weekly losses as well.
Investor sentiment was dampened by UK retail sales figures released on Friday showing a sharp 2.7% monthly drop in May, marking the steepest fall in 18 months. This decline was notably worse than the 0.5% decrease expected by economists and reflected reduced spending in core areas such as food stores, household goods, clothing, and DIY supplies. On a year-on-year basis, sales volumes fell 1.3%, contradicting expectations of continued growth. This data has raised concerns about a potential slowdown in the UK economy, which had shown a promising 0.7% GDP growth in the first quarter of 2025 but is now exhibiting signs of faltering momentum. Analysts have pointed to one-off factors that boosted earlier growth, ongoing trade uncertainties—including tariff policies—and rising operational costs linked to government tax increases as contributing factors to the downturn. Although Bank of England officials held interest rates steady at 4.25%, concerns persist around a weakening labour market and subdued wage growth outlook.
The weak retail data weighed on UK-listed retailers’ share prices, with notable declines seen in B&M, JD Sports, Next, and Marks & Spencer. Meanwhile, government borrowing for May reached £17.7 billion, exceeding forecasts and representing the highest May borrowing figure outside the pandemic era. Although borrowing for the year-to-date was below initial projections, elevated public sector pay bills and inflationary pressures are complicating fiscal management. Chancellor Rachel Reeves has set a target to balance day-to-day government spending by 2029-30, while committing to substantial NHS funding increases.
Meanwhile, geopolitical developments provided some counterbalance during the trading day. French President Emmanuel Macron announced plans for a comprehensive diplomatic initiative involving France, Germany, and the UK to offer Iran a platform for negotiations aimed at de-escalating the conflict with Israel. This comes as US President Donald Trump signalled he would decide within two weeks whether the US would take action against Iran, calling the period a “ticking volatility clock” for markets. Oil prices, which had surged earlier over concerns about supply disruptions given Iran’s role in OPEC, retreated by Friday’s close, contributing to declines in energy sector shares such as BP and Shell.
The pound fluctuated but ended stronger against the dollar at 1.3467 as investors factored in geopolitical risks alongside domestic economic challenges. Sterling was on track for a weekly loss, pressured by heightened tensions in the Middle East, which have driven demand for safe-haven assets like the US dollar. The European markets showed some resilience, with Paris’s CAC 40 and Frankfurt’s DAX 40 both closing higher.
Investor anxieties are further compounded by mixed economic signals—while the UK economy expanded in early 2025, recent indicators point to a slowdown in consumer spending and weakening business confidence. The Bank of England projects modest overall growth this year but has noted continued risks from a weakening labour market and rising energy costs. In addition, uncertainties stemming from trade policies under the Trump administration and domestic tax increases are expected to weigh on economic performance.
On the corporate front, FTSE 100 companies faced varied fortunes. The Berkeley Group’s shares dropped sharply after the housebuilder issued subdued profit guidance amid tougher trading conditions. Similarly, Mulberry’s shares fell over 11% following an announcement of a £20 million capital raise and a cost-cutting restructuring plan, reflecting challenges in the luxury retail environment. Conversely, some stocks including Melrose Industries, Standard Chartered, and Prudential recorded gains.
Looking ahead, markets will pay close attention to upcoming economic data, including fresh PMI readings in the UK, eurozone, and the US, alongside US housing data. Investors remain cautious as they navigate a complex mix of geopolitical tensions, inflation concerns, and tentative consumer spending patterns.
Reference Map:
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- Paragraph 2 – [1], [2], [3], [4], [7]
- Paragraph 3 – [1], [2], [3], [4]
- Paragraph 4 – [1], [6]
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- Paragraph 6 – [1], [4], [5]
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- Paragraph 8 – [1], [6]
Source: Noah Wire Services
- https://www.independent.co.uk/news/business/donald-trump-gsk-emmanuel-macron-iran-israel-b2774069.html – Please view link – unable to able to access data
- https://www.ft.com/content/51347d4b-f1f9-4646-b2ef-f830d9a3233c – In May 2025, British retail sales experienced a significant decline of 2.7%, marking the steepest monthly drop in 18 months. This downturn was primarily driven by reduced spending in food stores, which saw a 5% decrease, and household goods, which declined by 2.5%. The decline was notably worse than the 0.5% decrease anticipated by economists. Compared to May 2024, sales volumes were down 1.3%. These figures suggest a potential slowdown in the UK economy, which had previously grown by 0.7% in the first quarter. The Bank of England maintained interest rates at 4.25% due to concerns over a weakening job market. Concurrently, UK government borrowing in May 2025 reached £17.7 billion, exceeding expectations, influenced by increased public sector pay amid inflation, despite higher tax receipts. For the fiscal year to date, borrowing totalled £37.7 billion, below the £40.7 billion forecast. Chancellor Rachel Reeves aims to balance day-to-day spending by 2029-30 while enhancing services, including a £29 billion annual NHS funding boost. Consumer confidence showed slight improvement in June, according to a GfK survey.
- https://www.reuters.com/business/retail-consumer/uk-retail-sales-fall-may-2025-06-20/ – UK retail sales in May 2025 experienced a sharp decline of 2.7% from the previous month, marking the steepest monthly fall since December 2023. This decline was significantly greater than the 0.5% drop forecasted by economists. Sales volumes were also down 1.3% compared to the same month in 2024, contrasting with expectations of a 1.7% rise. The downturn was attributed to reduced spending on food, alcohol, tobacco, clothing, and DIY goods, following a strong April boosted by sunny weather and consumer splurging. Despite this, some optimism remains for consumer spending to outperform other economic sectors in 2025. Sterling experienced slight depreciation against the U.S. dollar following the release of the data. Meanwhile, government borrowing reached £17.7 billion in May, exceeding expectations. The broader economic picture shows mixed signals, with Q1 2025 GDP growing by 0.7%, but April data indicating a contraction due to expiring tax benefits and U.S. tariffs. Retailer performance varied: Tesco reported strong sales, while Poundland announced plans to shut 68 stores amid a tough market.
- https://www.ft.com/content/317ef13e-0143-4a03-9b8d-82b59ad4c061 – The UK economy showed promising growth in early 2025, with a 0.7% GDP increase in the first quarter. However, signs of a familiar downturn are emerging. Retail sales in May slumped, erasing earlier gains, and businesses forecast stagnant demand across key sectors such as retail, manufacturing, and construction. Analysts attribute the slowdown to one-off factors that boosted early growth, trade uncertainty, and rising operational costs linked to government policies such as tax hikes and new regulations. The Bank of England (BoE), which held interest rates steady, highlighted a deteriorating labor market, with a notable drop in May employment figures and subdued wage growth prospects. Analysts fear this could mark the fourth consecutive year of strong starts followed by weak overall performance. Trade disruptions, including those linked to Donald Trump’s tariff policies, and Labour’s £40 billion tax increases are expected to weigh on the economy. Despite potential consumer resilience due to savings and wage growth, weak business confidence and constrained demand raise concerns that 2025 may follow the same disappointing pattern. Economists urge caution, noting it’s too early to declare a definitive downturn, but current data offers little optimism.
- https://www.reuters.com/world/uk/sterling-set-weekly-loss-middle-east-conflict-overshadows-domestic-data-2025-06-20/ – Sterling experienced slight gains against the U.S. dollar on Friday, rising 0.2% to $1.3495, but was on track for a weekly loss of 0.6%. The pound’s decline followed two weeks of gains and was driven by rising geopolitical tensions stemming from the Israel-Iran conflict, which bolstered investor demand for safe-haven currencies like the dollar. The dollar was poised for its strongest weekly rise in over a month. Despite the Bank of England’s (BoE) decision to hold interest rates at 4.25% and weak UK retail sales data, the pound saw minimal movement. The BoE expressed concern about risks from a weakening labor market and rising energy prices. A 6-3 vote by the BoE favoring a potential rate cut in August led markets to price in a near-60% likelihood of a quarter-point reduction. Meanwhile, the euro edged up to 85.43 pence, marking a second consecutive weekly gain. UK retail sales dropped sharply in May, and government borrowing rose slightly more than forecast to £17.7 billion. Despite faster-than-expected growth in Q1 2025, the UK economy contracted in April due to the end of a property tax break and the impact of new U.S. tariffs. The BoE projects a 1% growth rate for the year.
- https://www.reuters.com/business/finance/global-markets-view-usa-2025-06-20/ – Global markets are cautiously optimistic following U.S. President Trump’s decision to delay American involvement in the Israel-Iran conflict for two weeks to allow European-led negotiations in Geneva. This temporary reprieve has eased tensions and partially reversed market losses seen during the U.S. Juneteenth holiday. Meanwhile, oil prices spiked then retreated, with U.S. crude hovering above $75 per barrel, underscoring concerns over energy supply due to Iran’s critical role as a major OPEC producer. The Federal Reserve adopted a slightly hawkish tone, signaling heightened inflation concerns, though its future policy path remains uncertain amid geopolitical risks and volatile oil prices. Elsewhere, central banks in Switzerland and Norway notably cut rates, driven by currency-related pressures. In Europe, foreign ministers are pressing Iran to rejoin nuclear talks, while the EU moves to exclude some Chinese firms from public tenders due to unfair trade practices. China’s foreign investment dropped sharply, reflecting ongoing economic challenges. Weekend readings explore key topics such as debt monetization, central bank communications, U.S. defense interests in Europe, and America’s strategic mineral ambitions in Oklahoma. Investors remain watchful ahead of significant upcoming U.S. economic data and geopolitical events, including a NATO summit and further testimony from Fed Chair Powell.
- https://www.ft.com/content/efdadd0d-f34f-41b1-a7f3-9ae79d6c0bbf – UK retail sales growth slowed significantly in May 2025, increasing at just 1% year-on-year—the weakest rate so far this year and well below the 2.5% average from January to May. This underperformance also trails behind the April inflation rate of 3.4%, indicating a decline in real-terms consumer spending. The slowdown is attributed to lower consumer confidence, with consumers reducing purchases of non-essential goods like fashion and expensive items. Food sales, however, remained stable, boosted by major football tournaments, and gaming performed well due to popular new releases. Industry experts suggest multiple factors contributed to the decline, including unseasonably early seasonal spending driven by good weather and increased household bill pressures in April. The British Retail Consortium’s data aligns with Barclays’ report showing a similar 1% growth in card spending—again below inflation. Consumers appeared to shift towards more affordable options, as seen in clothing sector data where sales rose modestly while transaction numbers increased more, indicating trading down. Spending on electronics and home improvements decreased. Despite strong economic growth of 0.7% in Q1, economists forecast a slowdown in Q2. Shoppers are increasingly cautious, focusing on value and smaller discretionary purchases amidst economic uncertainty.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
10
Notes:
The narrative is current, published on June 20, 2025, with no evidence of prior publication or recycled content. The inclusion of recent data and events, such as the FTSE 100’s performance and the Israel-Iran conflict, supports its freshness.
Quotes check
Score:
10
Notes:
No direct quotes are present in the narrative, indicating original reporting. The absence of identifiable quotes suggests the content is exclusive or original.
Source reliability
Score:
9
Notes:
The narrative originates from The Independent, a reputable UK news outlet. While generally reliable, it’s advisable to cross-reference with other reputable sources for comprehensive verification.
Plausability check
Score:
9
Notes:
The claims regarding the FTSE 100’s performance and the Israel-Iran conflict align with information from other reputable sources. However, the absence of specific data points or direct quotes limits full verification. The lack of supporting detail from other reputable outlets is noted as a potential concern.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative is current, original, and originates from a reputable source. While the absence of direct quotes and specific data points limits full verification, the overall content aligns with information from other reputable outlets, supporting its credibility. 
