London open: Stocks fall as UK economy stagnates

London stocks fell in early trade on Monday as data showed the UK economy stalled in the third quarter.

At 0840 GMT, the FTSE 100 was down 0.2% at 8,066.81.

Revised figures released by the Office for National Statistics showed the economy flatlined in Q3, down from a previous estimate of 0.1% growth.

The ONS also revised its estimate for growth in April to June to 0.4%, down from 0.5% initially estimated.

The figures showed there was no growth in the services sector in the latest quarter, while a 0.7% increase in construction was offset by a 0.4% fall in production.

Liz McKeown, director of economic statistics at the ONS, said: "The economy was weaker in the second and third quarters of this year than our initial estimates suggested with bars and restaurants, legal firms and advertising, in particular, performing less well.

"The household saving ratio fell a little in the latest period, though remains relatively high by historic standards. Meanwhile real household disposable income per head showed no growth."

Paul Dales, chief UK economist at Capital Economics, said: "Overall, these data suggest that after a bumper first half of the year, the economy ground to a halt in the second half of the year due to a combination of the lingering drag from higher interest rates, weaker overseas demand and some concerns over the policies in the Budget.

"Our hunch is that 2025 will be a better year for the economy than 2024. But more recent data suggest the economy doesn’t have much momentum as the year comes to a close."

In equity markets, news was thin on the ground, but insurer Direct Line jumped after agreeing to be bought by rival Aviva for £3.75bn.

The offer values each Direct Line Share at 275p, a premium of 73.3% to the closing price of 158.7p on 27 November.

Aviva said it plans to achieve annual pre-tax cost savings of at least £125m through job cuts, "economies of scale and increased efficiency".

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "Christmas has come early for Direct Line investors, as Aviva’s £3.7bn buyout has officially been signed, sealed, and delivered. The terms of the deal remain unchanged from what was floated to the markets earlier this month, and the festive confirmation has wrapped up what many investors had already baked into expectations, leaving little surprise under the tree.

"This deal strikes a balance that seems to deliver value for both parties. Direct Line has been navigating choppy waters, with its market share steadily eroding and a history of missteps from previous management leaving the ship off course. While the new management team has been working to steady the vessel, even they couldn’t deny that Aviva’s offer was the golden ticket they’d struggle to replicate on their own. Though they’ve expressed confidence in their independent strategy, this proposal was simply too compelling to pass up.

"For Aviva, the price tag is sitting on the edge of what might be considered a bargain, but the strategic potential could prove to be a real cracker. Acquiring Direct Line cements Aviva’s status as the heavyweight champion in the UK home and motor insurance markets. Beyond bolstering their market dominance, the deal unlocks opportunities to put the Direct Line transformation on the fast track, while capitalizing on the efficiency gains that come with increased scale. It’s a bold move that could turn out to be a gift that keeps on giving."

Market Movers

FTSE 100 (UKX) 8,066.81 -0.22%
FTSE 250 (MCX) 20,384.08 -0.33%
techMARK (TASX) 4,574.92 -0.10%

FTSE 100 - Risers

Airtel Africa (AAF) 107.00p 1.61%
Standard Chartered (STAN) 985.60p 1.40%
Smurfit Westrock (DI) (SWR) 4,189.00p 1.06%
BAE Systems (BA.) 1,166.00p 0.87%
HSBC Holdings (HSBA) 767.30p 0.85%
AstraZeneca (AZN) 10,318.00p 0.60%
easyJet (EZJ) 574.60p 0.52%
Pershing Square Holdings Ltd NPV (PSH) 3,724.00p 0.49%
Rolls-Royce Holdings (RR.) 577.60p 0.38%
Barclays (BARC) 260.95p 0.27%

FTSE 100 - Fallers

St James's Place (STJ) 850.00p -1.51%
Experian (EXPN) 3,456.00p -1.48%
Entain (ENT) 697.60p -1.41%
Spirax Group (SPX) 6,855.00p -1.37%
Relx plc (REL) 3,581.00p -1.32%
WPP (WPP) 822.40p -1.30%
Ashtead Group (AHT) 4,967.00p -1.25%
Persimmon (PSN) 1,197.50p -1.16%
3i Group (III) 3,507.00p -1.16%
JD Sports Fashion (JD.) 93.94p -1.12%

FTSE 250 - Risers

Direct Line Insurance Group (DLG) 250.60p 3.04%
Victrex plc (VCT) 1,076.00p 1.89%
Carnival (CCL) 1,922.50p 1.88%
Vesuvius (VSVS) 418.50p 1.70%
Energean (ENOG) 993.00p 1.43%
Syncona Limited NPV (SYNC) 101.20p 1.40%
Asia Dragon Trust (DGN) 430.00p 1.18%
Vietnam Enterprise Investments (DI) (VEIL) 591.00p 1.03%
Indivior (INDV) 922.50p 0.87%
Discoverie Group (DSCV) 717.00p 0.84%

FTSE 250 - Fallers

Kainos Group (KNOS) 747.00p -3.24%
Oxford Nanopore Technologies (ONT) 139.70p -2.38%
Ferrexpo (FXPO) 100.40p -2.14%
Wood Group (John) (WG.) 63.90p -2.14%
Fidelity China Special Situations (FCSS) 214.50p -2.05%
SDCL Energy Efficiency Income Trust (SEIT) 53.70p -2.01%
Deliveroo Class (ROO) 139.30p -1.97%
Aston Martin Lagonda Global Holdings (AML) 102.80p -1.91%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 441.50p -1.89%
JPMorgan Emerging Markets Inv Trust (JMG) 107.20p -1.83%