In a recent note, Barclays emphasized that the U.K. market is currently undervalued, particularly the FTSE 250 index, which is trading at a 20% discount on a price-to-book basis. They noted that despite the ongoing cost-of-living crisis, rising inflation, and high government borrowing costs, the fundamentals of U.K. companies remain strong.
The analysts expressed confidence in sectors such as industrials, financials, utilities, and real estate, citing solid fundamentals and increasing merger and acquisition activity as supportive factors. Notably, they identified top stock picks including Rentokil, Trustpilot, and Shawbrook, which they believe have significant upside potential.
Additionally, Helen Jewell from BlackRock described the U.K. as an interesting diversifier, particularly highlighting the performance of mining companies like Glencore and Endeavour Mining, which have seen substantial gains. UBS also noted an improving earnings outlook for the U.K., raising its 2026 earnings growth forecast from 11% to 16%, while maintaining a neutral rating on U.K. stocks.
They anticipate robust earnings growth of 9% in 2027, particularly in banks, industrials, consumer discretionary, and healthcare sectors