London loses position as most valuable European stock market

Britain’s stock market has lost its position as Europe’s most-valued, as the economic downturn weighs on UK companies, data shows.

France has taken the top spot as the combined value of its companies’ shares have been boosted by currency movements and demand for French luxury goods.

It is the first time Paris has overtaken London since records began in 2003, according to data from Bloomberg.

The UK is expected to fall into recession this year as inflation rises.

The combined value of British shares is now around $2.821 trillion (£2.3 trillion), while France’s are worth around $2.823 trillion, Bloomberg calculates.

Shares in the UK’s medium sized companies have been doing particularly badly, as consumers rein in their spending and businesses struggle with higher costs.

London’s FTSE 250 share index – which lists medium sized companies – has slumped by almost 17% in the last 12 months.

The value of the pound also hit a record low in the wake of Liz Truss’s mini-budget, making it more expensive for companies to import goods and raw materials.

By contrast, currency movements have worked in French companies’ favour, said Bloomberg. France’s luxury goods makers have also helped to boost the overall value of its stock market.

Shares in LVMH, which owns fashion brand Louis Vuitton, have surged 22% in the last six months as China eased lockdowns and its shoppers returned to pre-pandemic habits.

Chinese shoppers accounted for around 35% of global demand for luxury goods before the pandemic, according to Bloomberg data.

As in other countries, energy and food prices have soared in the UK this year in part due to the war in Ukraine.

Many British homeowners have also seen a sharp rise in mortgage costs after Liz Truss’s mini-Budget drove up UK borrowing costs.

It has compounded existing problems in the economy, including a persistently weak pound and weaker trade since Brexit. The UK is the only G7 nation whose economy is still smaller than it was before the pandemic.

In the most recent quarter, from July to September, the UK economy shrunk by 0.2% and the Bank of England has warned the country faces its longest recession since records began.

Last year Amsterdam ousted London as the largest financial trading centre in Europe, although this was based on the total value of traded shares rather than companies.