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UPDATE 2-UK shares edge higher on bets of economic recovery; Barratt surges

(For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window)

* Barratt Development jumps on dividend payout plans

* London declares emergency over spread of new coronavirus strain

* Marks & Spencer likely to see further fall in sales - CEO

* FTSE 100 up 0.2%, FTSE 250 adds 0.3% (Updates to market close, adds comments)

Jan 8 (Reuters) - Britain’s FTSE 100 index inched higher on Friday to end the week with gains of more than 6% as investors bet on a swift economic recovery, while Barratt Developments surged on plans to resume dividend payouts next month.

The UK’s biggest homebuilder jumped 4.5% to the top of the FTSE 100 index after it also posted a rise in forward six-month sales.

The blue-chip index gained 0.2%, led by consumer discretionary and industrial stocks.

Neil Wilson, chief market analyst at Markets.com said more U.S. stimulus could mean more lending and borrowing resulting in higher bond yields which bodes well for equity prices.

“There is overall positivity about the phase of where the (UK) economy is heading and positive feelings about stimulus in the U.S..”

British blue-chips have gained nearly 38% from their record lows hit in February last year and are 10.6% away from their 2020 highs, as huge global stimulus measures boosted risk sentiment.

Britain’s medical regulator approved Moderna’s COVID-19 vaccine for use, and has agreed to purchase an additional 10 million doses as it eyed a spring rollout of the shot.

The domestically focussed mid-cap index rose 0.3%.

Britain reported 1,325 new deaths from COVID-19 on Friday, its highest daily figure since the outbreak of the pandemic, as the country struggled to stem rising infections from a new highly transmissible variant of the coronavirus.

London, meanwhile, declared a major incident on Friday with hospitals at risk of being overwhelmed by COVID-19 patients.

Clothing retailer Marks & Spencer fell 2.4% after its CEO said the company is likely to see a further deterioration in sales in its clothing and homewares division in the current quarter due to the latest national lockdown. (Reporting by Shashank Nayar and Shivani Kumaresan in Bengaluru; Editing by Anil D’Silva, Uttaresh.V, Kirsten Donovan)

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