UK equities draw defensive investor interest amid global market volatility

Traders Union
All News
Financial News
UK equities attract investors

Highlights

Barclays highlights UK equities as undervalued, with FTSE 250 stocks trading at a 20% discount on a price-to-book basis and solid profitability.
Barclays and BlackRock favor UK industrials, financials, utilities, real estate and select consumer stocks, citing attractive valuations, M&A potential, and defensive characteristics amid global volatility.
UBS raises its 2026 UK earnings growth forecast to 16% from 11%, expecting robust 9% growth in 2027 supported by commodity strength and reasonable valuations.

Valuation case and sector preferences

As reported by CNBC, strategists at Barclays say the UK market remains cheap and offers investors a relatively defensive place to position while volatility persists across global markets. In a note on Wednesday, they describe British equities as "unloved but not a bad place to hide," adding that near-term concerns around AI and oil may help the FTSE 100, while ongoing merger and acquisition activity reinforces the view that UK assets remain undervalued.

Barclays says UK valuations remain depressed, especially for domestically exposed companies and stocks on the FTSE 250, which it says are trading at about a 20% discount on a price-to-book basis. The bank adds that this de-rating persists even though profitability stays healthy relative to global peers.

The analysts keep high conviction on UK industrials, financials, utilities, real estate and selective consumer names, citing attractive valuations, solid fundamentals and rising M&A optionality. Among their top UK stock picks with the biggest upside potential are Rentokil, Trustpilot and Shawbrook.

Global turbulence and earnings outlook

The investment case is emerging even as the UK faces a difficult domestic backdrop, including a cost-of-living crisis, rising inflation and the highest government borrowing costs in the G7. The country’s new government is due to present its first budget next month as it tries to balance fiscal discipline with higher defense spending and support for households under pressure.

At the same time, broader market turbulence linked to geopolitical concerns, AI-related fears, the U.S.-Iran war, oil price moves and uncertainty over government fiscal policies is pushing investors toward markets seen as relatively inexpensive. Helen Jewell, international chief investment officer for fundamental equities at BlackRock, says the UK is "a really interesting diversifier," highlighting dividend-paying sectors, banks and mining companies as areas of opportunity.

Jewell says her team remains long European banks and includes UK lenders in that view, while also keeping an overweight position in miners because of elevated copper prices. She adds that some UK companies have been sold off as part of the "AI loser" trade, but still offer attractive single-stock opportunities on valuation grounds.

UBS also says the UK’s improving earnings outlook should support equities. While it rates UK stocks Neutral, its Chief Investment Office says reasonable valuations, commodity strength and broader second-quarter earnings growth lead it to raise its 2026 earnings growth forecast for the UK to 16% from 11%, and it expects robust 9% earnings growth in 2027.

UK borrowing costs and October Budget pressures were the focus of our earlier coverage, as higher gilt yields and renewed rate-hike expectations squeezed the Treasury’s fiscal headroom. We noted that geopolitical shocks and persistent inflation were adding to market strain just as the OBR prepared updated forecasts, complicating the government’s ability to stick to its budget rules.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.