Body Shop, McLaren, Aston Martin, Tata Steel: The UK is in trouble

The UK economy is not doing well, with the IMF expecting it to be the second worst-performing country in the G7 after Germany. Inflation remains at an elevated level while Brexit is still a thorn in the flesh. Worse, UK stocks are lagging behind their global peers with FTSE 100 and the FTSE 250 indices being left behind in the ongoing bull run.

Key companies are underperforming

A closer look at some of the top iconic British brands shows that they are not doing well. Burberry, the iconic luxury brand, has seen its stock shed over 50% of its value in the past few months and is now hovering at its lowest point since November 2020. In contrast, its top competitors like LVMH and Hermes have roared back and are now some of the biggest companies in Europe.

Meanwhile, Aston Martin Lagonda, the best-known premium British automaker has been in trouble because of its slow growth and high debt burden. Its stock has plunged by more than 98% from its highest point on record. The company is now in talks with lenders on how to deal with its huge $1.4 billion debt burden. In contrast, Ferrari shares have soared, making it the seventh biggest automaker in the world.

The same situation is happening to McLaren, a company that makes some of the best premium vehicles. Reports indicate that the cash-strapped company is raising cash from its investors as its business slows and costs rise. Arrival, a UK EV company, recently collapsed and is being sold for parts.

The Body Shop, a leading British retailer, is the other high street company to go bankrupt. It announced its insolvency on Tuesday in a situation that puts over 2,000 jobs at risk. This announcement came a few weeks after Tata Steel shuttered a blast furnace, risking thousands of jobs.

There are more problems in the UK. For example, its most blue-chip banking groups like Lloyds, Barclays, and NatWest are not doing well. As shown below, their shares have lagged behind their European banks like Unicredit and UBS. 

Further, companies are no longer listing at the London Stock Exchange (LSE). On Tuesday, Tui shareholders voted to ditch the exchange. 

Lloyds Bank and Barclays vs UBS and Unicredit

The UK economy is in a bad shape

All this is just a tip of the iceberg since these are the most well-known companies. Beneath the surface, the situation is much worse. For example, data released recently shows that the number of companies going bankrupt or declaring insolvencies jumped to a multi-decade high in 2023.

Meanwhile, the country’s manufacturing sector is in deep trouble. According to S&P Global, the manufacturing PMI has remained below the expansion zone of 50 since August 2022. Most manufacturers have warned that the situation may worsen, barring a change of policy by the government.

For example, manufacturers note that the US has launched multi-billion dollar investments in key industries like EV and clean energy. The UK is yet to launch a similar project, which has pushed many of them to move to the US.

Further, the country’s conservative party has been in wrangles in the past few years. It has had three Prime Ministers in the past few years, affecting government policy. Also, the UK is still suffering from the impacts of Brexit, which have reduced its attractiveness.

Sadly, there is no easy way out for this crisis, especially now that the Labour Party is widely expected to win the next election and that the UK will not rejoin the EU.

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