Stock market hits record as company failures slow down

(First Edition)

LONDON shares rose to a new peak yesterday, adding pounds 7.5bn to the value of the stock market, as City hopes rose that the British economy is at last pulling out of recession, writes Robert Chote.

The FT-SE index of 100 leading London shares rose 36.3 points to close at 2,918.6, with some City analysts predicting that the index could breach 3,000 by the time of the Budget on 16 March. The pound rose by almost a pfennig against the German mark to close at DM2.3850, but fell slightly against a strong US dollar.

The Treasury said yesterday that the economy had been a little stronger late last year than had been expected at the time of the Autumn Statement.

Evidence since then suggests that the downturn is coming to an end. In its monthly monetary report, the Treasury also pointed to new evidence of the slowdown in inflation.

Retail goods prices - excluding volatile food, drink and tobacco prices - fell in the year to January. This is the first time this measure of inflation has been negative since the retail price index was restructured more than 30 years ago. But price rises in services remain stubbornly high at 6.4 per cent.

Brian Pearse, chief executive of Midland Bank, echoed the Treasury's guarded optimism. 'We're just beginning to see a glimmer of light ..It may be that economically we are seeing a slight lifting of the gloom.' But he warned that banks would be wary of making risky loans to companies that were hoping to expand.

Touche Ross, the accountants, reported that the slowdown in company failures in January had continued for the 11th month, with 404 appointments of receivers and administrators.