UK Stock Market 'May Hit Record Levels'

By Poppy Trowbridge, Consumer Affairs Correspondent

City forecasters have predicted the UK stock market may reach record levels in the new year.

After a steady - if not stellar - 2013, the FTSE 100 is set to outperform other indices over the next few years, according to a report by Capital Economics.

The FTSE, a measure of the UK's top 100 shares, closed at 6,749 points on Tuesday.

The index gained 0.3%, bringing its annual advance to 14%, the biggest annual rally since 2009.

Yet measures of British consumer confidence suggest the financial markets do not reflect reality for many.

Pay is only rising at 0.9%, according to the Office for National Statistics.

And corporate profit warnings dampen the mood further.

Debenhams was one of the first to report on Christmas sales figures, and after a slow sale season, profits are already down £30m on last year.

It blamed the poor performance on the continuing decline of the high street, the impact of the recession on household incomes and the bad weather.

Retail analyst at ESCP Europe Jeremy Baker said: "More and more shops are chasing the same pound.

"There is a finite amount of shopping one person can do."

Still, in his Autumn Statement announcement, Chancellor George Osborne said the UK economy will grow more rapidly in coming years.

The rate of inflation has started to slow, falling to 2.1% in the latest reading.

Unemployment fell to 7.4% this month, the lowest rate in nearly five years.

Top city economists say the stock market may soon be even better than back during the tech boom years, when it reached a high of 6,930 points in December 1999.

Stock analysts at Citigroup are especially optimistic, setting a target for the FTSE of 8,000 points by the end of 2014.

:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202.

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