Remember when everyone said the London was finished?
Brexit doom, political chaos, sky-high valuations in America – you name it, the UK market caught every possible punch over the past decade. Yet here we are in late 2025 and something rather curious is happening: the FTSE 100 keeps grinding to new all-time highs while barely anyone in Britain seems to care. In fact, most domestic investors are still hiding in cash. Funny old world, isn’t it?
I’ve been watching markets long enough to know that the best opportunities often arrive precisely when sentiment is this lopsided. And right now, the stars look remarkably well aligned for British equities to enjoy a proper multi-year bull run. Let me explain why I’m increasingly excited.
The Great Global Misunderstanding About UK plc
One of the biggest myths in investing is that a country’s stock market performance tracks its domestic economy. It really doesn’t.
Australia’s economy has grown modestly over the last ten years, yet its stock market more than doubled. China’s economy boomed, but the Shanghai index is basically flat over the same period. The reason? What matters is where listed companies actually make their money.
Roughly 75% of FTSE 100 revenues now come from outside the UK. For many household names the figure is 90-100%. Think Shell, Rio Tinto, British American Tobacco – giants that happen to keep their headquarters and listing in London but do almost no business with British consumers.
Even the FTSE 250, traditionally seen as more “domestic”, now derives about half its sales overseas. Companies like Vodafone, National Grid and Compass Group have quietly morphed into global players over the past two decades.
The UK stock market is basically a global emerging-market fund with a London postbox.
– A phrase I’ve heard from more than one overseas fund manager recently
That quip contains more truth than most British investors realise.
Valuations That Still Scream “Bargain”
Let’s talk numbers – the kind that make value investors salivate.
As I write, the FTSE 100 trades on about 13 times forward earnings with a dividend yield pushing 4%. Compare that to the S&P 500 on 22 times and barely 1.3% yield. The gap is even wider if you strip out the mega-cap tech giants that dominate US indices.
Mid and small-cap UK stocks look cheaper still – many on single-digit price-earnings ratios and yields above 5-6%. These are levels we normally associate with crisis, not with an economy growing (however slowly) and corporate profits rising.
Global investors have noticed. Foreign buying of UK equities has surged over the past two years while British pension funds and retail investors continue selling. It’s the investment equivalent of selling your house to overseas buyers while you camp in the garden complaining about the weather.
The Turnaround Stories Hiding in Plain Sight
Twenty years ago the FTSE 100 was stuffed with lumbering conglomerates that had grown fat on 1990s mergers and then stagnated. Many of those names are still around, but the businesses underneath have changed dramatically.
Take GlaxoSmithKline (now Haleon plus GSK) – once the poster-child for pharmaceutical inertia, now delivering blockbuster drugs and dividend hikes. Vodafone – written off as a basket case for years – has slashed debt, sold underperforming units and is finally seeing subscriber growth again.
Even Diageo, after a painful derating when it missed numbers in 2024, responded with ruthless cost-cutting and portfolio pruning. The share price has already recovered most of the lost ground.
Management teams across London-listed companies have rarely been more focused on capital discipline, buybacks and progressive dividends. They learned the hard way that nobody in Whitehall was coming to save them.
Domestic Money Is About to Wake Up
Perhaps the most exciting part and the one that could really ignite the next leg higher is the wall of domestic money still sitting on the sidelines.
British savers have ploughed record amounts into cash over the past few years. The household savings ratio is running at double its long-term average. More than two-thirds of ISAs are held in cash, earning rates that are already falling fast as the Bank of England cuts.
- UK equity funds have seen outflows in 50 of the last 51 months
- Cash ISAs hold over £300 billion and growing
- Interest rates have peaked and are heading lower
- Stock markets have delivered double-digit annual returns for three straight years
At some point usually just after everyone has sworn off shares forever that lightbulb moment arrives. Savers realise cash is losing purchasing power and the stock market isn’t as scary as the headlines suggest. When that rotation begins (and 2026 feels like the perfect year), the fuel for a proper melt-up will be in place.
What About Politics and Tax?
Yes, the recent Budget was grim reading for anyone who likes low taxes and light regulation. Employer national insurance hikes, capital gains alignment, and the usual suspicion toward wealth creation won’t help sentiment.
But here’s the thing: London-listed companies long ago stopped relying on government goodwill. AstraZeneca didn’t threaten to move its HQ to America because it loves Boston’s weather; it did so because the commercial calculus made sense. Most big UK plc decisions are now made with one eye on global opportunity and the other on whichever jurisdiction offers the friendliest regime.
Markets are forward-looking. By late 2026 or early 2027 we’ll be into the next election cycle of political musical chairs. Investors are already pricing in the possibility of a more market-friendly administration. Stranger things have happened.
How to Position for the Upside
If I’m right and this really is the early innings of a multi-year UK revival here are the areas that look most compelling to me:
- Global giants with London listings – the “emerging market fund in disguise” names offering growth plus 4%+ yields
- Quality domestic mid-caps – companies like Next, Howden Joinery, Games Workshop trading on reasonable ratings with strong pricing power
- Turnaround situations – banks (Lloyds, NatWest), housebuilders (when mortgage rates fall), and selected miners if China stabilises
- Investment trusts – many still trade on double-digit discounts despite holding world-class assets
Diversification remains key. No market goes up in a straight line, and currency moves can be brutal. But the risk/reward feels overwhelmingly positive from here.
The UK stock market has spent years being the world’s whipping boy. Cheap, ignored, and deeply unfashionable. Those are exactly the conditions from which great bull markets are born.
Sometimes the best investments are the ones that feel uncomfortable at first. Right now, adding to British equities after a decade of pain certainly qualifies. But in my experience, that’s usually when the real money gets made.
Here’s to the next chapter being rather more cheerful than the last.
