The FTSE 100 index closed 0.5% lower at 7,543.41 points on Wednesday, following a mixed performance across the market. The decline comes as concerns resurface over Labour leadership uncertainty, with party leader Sir Keir Starmer's leadership under scrutiny.
According to a YouGov poll, 47% of Labour Party members believe Sir Keir Starmer should step down as leader, while 29% think he should stay in the job. The uncertainty has weighed on investor confidence, leading to a decline in the FTSE 100 index.
Bank of England Governor Andrew Bailey has warned that the UK economy is facing a challenging period, with inflation expected to remain above target for the foreseeable future. The central bank has raised interest rates by 0.75% since the start of the year, taking the base rate to 4.5%.
For UK savers, the rise in interest rates means they can earn higher returns on their savings, but the higher cost of borrowing may impact mortgage holders. Investors are advised to seek the advice of a qualified financial adviser before making any investment decisions.
The decline in the FTSE 100 index has a broader impact on the UK economy, with a 1% drop in the index translating to a GBP 10 billion loss in market value.
The FTSE 100 index is expected to remain volatile in the coming days, as investors await clarity on the Labour leadership situation and the UK economic outlook.