Recession threat as Britain reels from Reeves’s Budget

The FTSE 100 recorded its biggest weekly gain in more than six months on Friday as a slide in sterling supported dollar earners, while banks came under pressure from weak business activity data.

The blue-chip FTSE 100 ended the day 1.4pc higher, and logged a 2.5pc weekly rise, its best since May 7.

The pound tumbled 0.6pc to $1.25105 per dollar, its weakest since May, after data showed British business output in November shrank for the first time in more than a year, and retail sales also fell by much more than expected in October.

The currency’s decline helped lift shares of UK-listed international firms such as AstraZeneca, Unilever and Reckitt Benckiser, which draw a major portion of their revenue overseas.

Rachel Reeves, the chancellor, announced a budget in late October which raised taxes on business and the wealthy, contributing to the first contraction in private sector activity in over a year.

“So, all this points to uncertainty and sort of a fragile outlook for the UK as a whole,” said Daniel Coatsworth​​​​, investment analyst at AJ Bell.

“But overall, it’s a strange situation where you have lots of negative economic data points that’s weakened the pound, but is really good for the large amount of overseas focus companies that are listed in London.”

However, banks including Barclays, HSBC and Lloyds Banking Group dropped between 0.3pc and 2.1pc, weighed down by the gloomy data.

Traders expect the Bank of England to hold interest rates next month, but see more cuts coming next year. They now expect about 0.72 percentage points worth of cuts next year, compared with 0.67 percentage points before the release of the data.