Citi says UK GDP to shrink 7.6% due to Covid, earnings to halve

UK GDP will shrink by 7.6% as a result of the coronavirus pandemic and ensuing containment efforts, Citi said on Thursday.

Citi, which said the UK economy has "high structural exposure" to containment efforts, said earnings per share are expected to halve this year.

"The bottom-up consensus is -20%, suggesting plenty more downgrades ahead," the bank said. "High payout ratios mean that UK dividends per share could also halve," it added.

The bank said defensive stocks score better than cyclicals across all fundamental factors, with its analysts most bullish on consumer staples.

"We think that income investors should favour defensive sectors such as telecoms, food & beverage, pharma and utilities," it said.