The UK stock market: An introduction
The diverse range of companies in the UK include large multi-national companies such as BP, Unilever and HSBC, but also a dynamic collection of smaller companies, which provide niche exposure to fast-growing areas of the global economy.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Why now to invest in UK stocks?
Sentiment towards the UK stock market has been weak, which has left the performance of UK shares trailing their international peers in recent years.6,7 However, this weakness may also be a strength, meaning there is a wealth of overlooked opportunities in the UK market, creating a fertile environment for active investors.
Improving momentum - The FTSE 100 had a strong start to 2025 as investors have sought to diversify portfolios away from the dominant US technology trade, briefly dipping in April amid ‘Liberation Day’ tariff shocks before rebounding to record highs by June.8
Better signs for the UK economy - The UK economy has been resilient and is now the second fastest growing economy in the G7.9 This stability may start to improve sentiment towards the UK stock market.
Buybacks and M&A – International buyers have shown confidence in UK companies, with robust merger and acquisition activity across the market.10 UK companies are also buying back their shares.11
Key drivers and risk of investing in the UK
The UK market is diverse, and a range of factors will influence performance for companies within it. Nevertheless, there are a number of metrics that are particularly important for the direction of the UK stock market that investors need to consider when investing in the UK.
Interest rates and sector sensitivity
Many companies in the UK market are sensitive to changes in the cost of borrowing, but particularly within sectors such as housebuilding and consumption. Lower interest rates can often boost UK share prices, while higher rates can weaken sentiment. This is particularly important when investing in smaller companies.
UK market vs UK economy
The UK stock market is not the same as the UK economy. Only around a fifth of the revenues in the FTSE 100 are generated in the UK.12 However, the strength of the UK economy will affect sentiment towards the UK market. The domestic economy has a greater influence when investing in UK small and mid cap companies.
Multinational revenues mean exposure to the US Dollar
Many of the UK’s larger companies are multi-national and earn a significant share of their revenues in dollars.12 As a result, their earnings and dividends to UK investors can lift when sterling is weak versus the US currency, and fall when it is stronger.
Clear rules and stability matter to investors
Government policy can have an influence over the UK stock market. Investors prefer a stable government, with predictable policy-making and clear rules. Policy can also be important for specific sectors, such as housebuilding and green energy, which may benefit from government support.
Can global growth sway UK market sectors?
Many of the dominant sectors in the UK market are economically sensitive, including banks, mining and energy companies. This means they may fluctuate according to the strength of the global economy.
Different sectors face different drivers
There will be individual influences on specific sectors within the UK market. For example, commodity price swings will be important for the energy and mining sectors, or the global regulatory environment for the banking sector.
Major market indices
The main performance indices for the UK market are those created by FTSE. These range from the FTSE 100 for larger companies, to the FTSE Small Cap for smaller companies, while the FTSE All Share covers all the market capitalisations. There is also the Numis Smaller Companies index, which measures smaller company performance, plus MSCI and S&P indices.
FTSE 100 – The FTSE 100 measures the performance of the largest 100 companies. It is dominated by financial companies, healthcare, energy and industrials. Its largest company is HSBC.4
FTSE 250 – The FTSE 250 measures the performance of medium-sized UK companies. It is diversified across sectors, with weightings in healthcare, industrials and consumer staples.13
FTSE Small Cap – The FTSE Small Cap measures the performance of the UK’s smaller companies. Its dominant sectors include financials, industrials, consumer discretionary and real estate.14
When should I invest in UK equities?
The UK market is diverse, and it is possible to find growth, income or value opportunities within it. However, overall, there are certain circumstances in which the market tends to do well relative to its global peers.
When interest rates are lower
The UK is a strong dividend market, paying a higher yield in aggregate than many of its peers.3 It may do well as interest rates fall and dividend stocks become more attractive. Small and mid cap stocks are particularly sensitive to changes in interest rates.
When the UK economy is buoyant
Around three-quarters of the revenues for the FTSE 100 are generated outside the UK,12 so UK economic strength or weakness doesn’t necessarily influence company growth. Nevertheless, it is important for sentiment towards the UK, particularly for the small and mid cap companies.
At times of geopolitical tension
With significant revenues from overseas, companies can benefit from a translation effect when sterling is weak, particularly versus the Dollar. A weaker pound can boost earnings and dividends from exporters and multinational firms.
When the global economy is strong
The UK market has higher weightings in more economically sensitive sectors such as financials, energy and mining that tend to do well when global economic growth is buoyant.
Investment opportunities in the UK
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The financials sector makes up 28% of the FTSE All Share index, combining banks and financial services companies.15 Among the large caps there are large, globally dominant banks such as HSBC and Barclays, while in the mid and small caps there are a range of asset managers, brokers and financial planning groups, including IG Group, St James’s Place or Aberdeen.16
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Oil and gas giants BP and Shell are dominant in the FTSE 100. The UK market also holds grid groups such as SSE Group and National Grid, which are crucial to the energy transition. Among the smaller companies, there are niche, fast-growing providers such as XP Power.
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Healthcare is well-represented across the UK market. In the FTSE 100, there are pharmaceutical giants AstraZeneca and GlaxoSmithKline. In the 250, there are smaller groups such as Spire Healthcare, that provides hospitals and clinics, or biotechnology group PureHealth.
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Consumer spending is almost 60% of the UK economy.17 This is reflected in the UK stock market, which has a wide range of diversified consumer discretionary and consumer staples groups. In the FTSE 100, there are global consumer group Unilever and drinks giant Diageo, alongside high street titans such as Tesco or Next. Further down the market cap there are Dunelm, Wetherspoons and Pets at Home.
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Niche industrials are a particular speciality in the UK’s smaller company indices. By virtue of its early industrialisation, the UK has a lengthy pedigree in precision engineering. These are a range of world-class companies, serving global markets in specialist areas.
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Technology is not a significant feature of the UK market, but there are companies that make significant use of technology to drive their business, including online delivery group Ocado, payments group Boku, or financial planning software IntegraFin. There are also companies with valuable data sets that could be significant beneficiaries of artificial intelligence.
Historic performance of UK equities
The FTSE All Share
The UK stock market has been out of favour with domestic and international investors as the economy has slowed in the wake of a series of shocks – notably the financial crash, Brexit and the pandemic. FTSE 100 has been staging a recovery since the start of 2025, and has outpaced the S&P 500 for the year to date.
FTSE 250
Small and mid-cap performance has tended to go in bursts. This part of the market performed strongly from April 2020 to August 2021, but then suffered a significant decline in the wake of the pandemic.18,19 It has been flat, yet volatile ever since. It has performed better since the start of 2025, but has lagged larger UK companies, with persistent worries over the UK’s economic performance.
Annual performance to last quarter end (%) (GBP)
Our Investment Trusts
The UK is home to over 100 investment trusts, many of them an important part of the FTSE 100 and 250 indices. BlackRock has been managing investment trusts for over 30 years and now holds over £4.283bn in AUM20 across its range.21 All its trusts are supported by the group’s global analyst team and led by our experienced portfolio managers.
Regional Hub FAQs: UK
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The UK stock market is home to over 1,000 companies.22 It combines large global leaders, with dynamic mid and smaller-sized companies. Its breadth means it can fulfil a variety of roles for investors, but it is particularly useful for income investors, and for diversification from global stock markets.
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The largest sector in the UK market is financials, at 28% of the FTSE All Share index. This combines banks, asset managers and financial services groups. Oil and gas giants are dominant in the FTSE 100, with healthcare also well-represented across the UK market. The market also holds a wide range of diversified consumer discretionary and consumer staples groups. The UK has a relatively small weighting in the technology sector.23
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The UK has a dynamic small and mid cap market, with a range of sectors represented. Historically, the sector has tended to do well when interest rates are low and investor confidence is high. More recently, however, it has suffered a period of significant outflows and performance has lagged larger UK companies.
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The BlackRock Income & Growth Investment Trust targets a growing income alongside capital returns, through the economic cycle. To do this, it focuses on UK companies with the potential to generate a high cash flow.
The BlackRock Smaller Companies Trust and The Throgmorton Investment Trust both have yields above 3%.24 This is partly a function of the relatively low price of smaller companies shares (yield is expressed as a percentage of the share price).
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The UK has a different sector make-up to other major indices such as the US. It is only lightly weighted in technology, for example, but has heavy weightings in financials and resources companies. This is different to the popular S&P 500 index, where technology is around one-third of the overall market capitalisation.25
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Although many companies in the UK market have large international businesses, sentiment towards the UK market can be influenced by weakness in the domestic economy and political upheaval. High interest rates may also weaken stock market returns. The UK is well-represented in a range of economically-sensitive sectors such as financials and energy. This means it may be weaker at times of low global growth.
Annual performance to last quarter end (%) (GBP)
|
30/09/2024 |
30/09/2023 |
30/09/2022 |
30/09/2021 |
30/09/2020 |
|
|
Price |
21.44 |
5.36 |
17.68 |
8.69 |
36.88 |
|
NAV |
14.67 |
5.97 |
14.35 |
7.67 |
46.68 |
|
Sector Price+ |
32.79 |
6.75 |
6.91 |
-7.38 |
33.51 |
|
Sector NAV+ |
21.10 |
13.58 |
1.33 |
-8.13 |
29.07 |
|
Reference Index‡ |
10.22 |
5.29 |
-3.95 |
11.98 |
22.05 |
† Morningstar IT Global Emerging Markets
‡ MSCI Frontier + Emerging Markets ex Selected Countries Index
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Our range
Source:
1 London Stock Exchange - Main market - June 2024
2 IG Index - What are the largest stock exchanges in the world - 20 August 2024
3 FT - Data Archive - 31 October 2025
4 LSEG - Factsheets – FTSE 100 - 30 September 2025
5 Chandler Good Governance Index - United Kingdom - April 2025
6 Marketwatch - FTSE All Share - 25 November 2025
7 Marketwatch - S&P 500 - 25 November 2025
8 Marketwatch - FTSE 100 - 25 November 2025
9 BBC - UK will be second-fastest-growing G7 economy, IMF predicts - 14 October 2025
10 White & Case - M&A Explorer - 22 June 2025
11 Citywire - Bumper buybacks stunt UK dividend growth - 23rd October 2025
12 LSEG - The UK’s very global country index - March 2024
13 LSEG - Factsheets – FTSE 250 - 30 September 2025
14 LSEG - Factsheets – FTSE SmallCap - 30 September 2025
15 LSEG - FTSE All Share factsheet - 30 September 2025
16 London Stock Exchange - FTSE All Share constituents - 31 October 2025
17 Commons Library Research Briefings - Components of GDP: Economic indicators - 16 October 2025
18 Marketwatch - FTSE 250 - 25 November 2025
19 Marketwatch - FTSE Small Cap - 25 November 2025
20 AIC - Compare investment companies - 20 November 2025
21 BlackRock - Our range - 31 October 2025
22 LSEG - Main market - 20 November 2025
23 LSEG - FTSE All Share - 20 November 2025
24 The AIC - Investment company screener - 20 November 2025
25 S&P - S&P 500 - 31 October 2025
Risk Warnings
Investors should refer to the prospectus or offering documentation for the funds full list of risks.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time and depend on personal individual circumstances.
Fund-specific risks
BlackRock Income and Growth Investment Trust plc
Counterparty Risk, Gearing Risk, Liquidity Risk
BlackRock Smaller Companies Trust plc
Counterparty Risk, Gearing Risk, Liquidity Risk, Smaller Companies
BlackRock Throgmorton Investment Trust plc
Complex Derivative Strategies, Counterparty Risk, Gearing Risk, Liquidity Risk
Description of Fund Risks
Complex Derivative Strategies: Derivatives may be used substantially for complex investment strategies. These include the creation of short positions where the Investment Manager artificially sells an investment it does not physically own.
Derivatives can also be used to generate exposure to investments greater than the net asset value of the fund / investment trust. Investment Managers refer to this practice as obtaining market leverage or gearing. As a result, a small positive or negative movement in stockmarkets will have a larger impact on the value of these derivatives than owning the physical investments. The use of derivatives in this manner may have the effect of increasing the overall risk profile of the Funds.
Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
Gearing Risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
Liquidity Risk: The Fund's investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Fund may not be able to realise the investment at the latest market price or at a price considered fair.
Smaller Companies: Shares in smaller companies typically trade in less volume and experience greater price variations than larger companies.
30/09/2024
-
30/09/2025
30/09/2023
-
30/09/2024
30/09/2022
-
30/09/2023
30/09/2021
-
30/09/2022
30/09/2020
-
30/09/2021
Price
21.44
5.36
17.68
8.69
36.88
NAV
14.67
5.97
14.35
7.67
46.68
Sector Price+
32.79
6.75
6.91
-7.38
33.51
Sector NAV+
21.10
13.58
1.33
-8.13
29.07
Reference Index‡
10.22
5.29
-3.95
11.98
22.05
† Morningstar IT Global Emerging Markets
‡ MSCI Frontier + Emerging Markets ex Selected Countries Index
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.