UK stock market ‘not a bad place to hide’ amid global volatility
The U.K. market offers attractive opportunities for investors seeking to weather the storm gripping global equities, strategists say. In a note on Wednesday, Barclays strategists pointed out that the “U.K. is cheap,” and touted British equities as an “unloved but not a bad place to hide.” “Near term, AI and oil jitters may help [the] FTSE 100 , and while domestic macro is tricky, valuations offer cushion,” they said. “Strong M & A activity only reinforces our view that U.K. assets remain undervalued & strategically attractive.” The U.K. is currently grappling with a cost-of-living crisis, rising inflation and the highest government borrowing costs in the G7. Its newly minted government will unveil its first budget next month, and is tasked with balancing the books while delivering higher defense spending and assistance to workers feeling the economic squeeze. But geopolitical concerns, AI fears , the U.S.-Iran war and its impact on oil prices , and jitters over various governments’ fiscal policies have created turbulence in global equity and bond markets this year. U.K. valuations “remain depressed,” Barclays said in its Wednesday note, particularly for domestic names and stocks listed on the FTSE 250 index. They added that these are trading at around a 20% discount on a price-to-book basis. “This de-rating has persisted in spite of profitability remaining healthy versus global peers,” they said. Barclays analysts retain high conviction across U.K. industrials, financials, utilities, real estate and selective consumer names, supported by attractive valuations, solid fundamentals and increasing M & A optionality, the analysts said. Their top stock picks in the U.K. with the biggest potential upside were pest control firm Rentokil , business reviews platform Trustpilot and lender Shawbrook . Helen Jewell, international chief investment officer for fundamental equities at BlackRock, told CNBC at the end of August that the U.K. is “a really interesting diversifier.” “From a breadth perspective, it’s got a lot of HALO industries [and] dividend payers,” she said. “In terms of where we see the opportunities, we still are long European banks and we include U.K. in that — the U.K. banks have done very, very well.” She added that her team is also retaining an overweight position on mining companies, pointing to elevated copper prices. “We remain positive on the mining companies, and the mining companies [play] a big part in the U.K. perspective,” Jewell said. London-listed mining firms have been major outperformers in the FTSE 100 over the past year, with Glencore surging 85.8%, Endeavour Mining shares jumping 57.7% and Antofagasta stock rising by 57.4%. “There are also other really good companies in the U.K. from a valuation perspective,” Jewell said. “We’ve seen some names be hit because they do seem to be deemed to be part of the ‘AI loser’ basket, but there are still some really interesting single stock opportunities.” Meanwhile, UBS strategists said in a note on Wednesday that the U.K.’s improving earnings outlook “should provide a supportive backdrop for equities.” Although the bank rates U.K. stocks as Neutral, its Chief Investment Office said that reasonable valuations, commodity strength, and broader earnings growth in the second quarter had led them to raise their 2026 earnings growth forecast for the U.K. from 11% to 16%. “The U.K.’s secular growth opportunities are better accessed selectively,” they said. “But we expect earnings growth to remain robust at 9% in 2027. We favor areas that combine structural growth with an improving cyclical backdrop, including banks, industrials, consumer discretionary, and health care.” — CNBC’s Michael Bloom contributed to this article.
