UK stocks slip amid inflation concerns and slowing business activity

London’s blue-chip shares declined on Thursday as weak economic data and continued uncertainty surrounding the Middle East conflict weighed on investor sentiment.

The benchmark FTSE 100 fell 0.43% by 11:15 am GMT, while the midcap FTSE 250 edged 0.18% higher.

Markets remained cautious after reports suggested tensions between Iran and the United States could remain unresolved.

Iran’s Supreme Leader directed that the country’s near-weapons-grade uranium should not be sent abroad, hardening Tehran’s position on one of Washington’s key demands during peace discussions.

Middle East tensions fuel inflation worries

The prolonged conflict in the Middle East has already contributed to higher oil prices, increasing fears that inflationary pressures could persist for longer than expected.

Investor concerns were further amplified by fresh economic data pointing to slowing business conditions in the UK.

A survey released on Thursday showed British firms are experiencing the most widespread decline in activity in more than a year, driven by the economic impact of the war and political uncertainty domestically.

Paul Dales, chief UK economist at Capital Economics, said the latest figures may indicate that persistent inflation pressures are not yet firmly established.

"These figures lend some tentative support to other evidence that suggests the conditions for a long period of high inflation are not in place," Dales said, as cited in a Reuters report.

Earlier this week, official data showed that UK inflation in April came in softer than expected.

Separate figures also indicated that the unemployment rate moved slightly higher.

Factory orders contract sharply

Additional economic weakness emerged from the manufacturing sector.

Data from the Confederation of British Industry showed factory orders in May contracted at the fastest pace since September 2020.

The figures added to concerns that Britain’s economic momentum may be weakening amid geopolitical uncertainty and rising pressure on businesses.

Despite the broader weakness in blue-chip stocks, the FTSE 250 managed modest gains, suggesting some resilience among domestically focused midcap shares.

Autotrader and Convatec lead declines

Among individual stocks, shares of Auto Trader Group dropped 9.1% after the company reported slower sales growth.

The stock emerged as the biggest decliner on the FTSE 100 during the session.

Healthcare-related stocks also came under pressure.

The medical equipment and services sector fell 2.7%, weighed down by losses in Convatec.

Convatec shares declined 7.9% after the medical equipment maker warned about margin pressure, adding to investor concerns over corporate profitability in a challenging economic environment.

The combination of geopolitical risks, weaker business activity, and sector-specific pressures kept overall market sentiment subdued, with investors continuing to monitor developments in the Middle East alongside incoming UK economic data.