How UK stocks ended up outperforming Wall Street in 2025

UK stocks beat Wall Street in 2025, even as American markets ran on an AI-driven rally. And it happened while politics, taxes, and slow growth headlines kept hanging over Britain.

London’s FTSE 100 index has surged by more than 21.1% year-to-date, putting it ahead of the Nasdaq Composite, which gained 20.7% and became the best-performing major index in the United States, far ahead of the S&P 500, which rallied by 16.2%.

The UK rally pushed the FTSE 100 to an all‑time high of 9,930.09 points on November 12, after several record closes across the year.

UK’s FTSE 100 rallies as profits, payouts, and deals stacked up

Russ Mould, investment director at AJ Bell, predicted in a clients note that the FTSE 100 could reach new all-time highs in 2026, adding that the rally came from a mix of rising corporate profits, large cash returns to shareholders, and merger and acquisition activity.

“All other things being equal, the omens are currently quite good as analysts forecast 14% profit growth from the FTSE in 2026, and dividend growth and an ongoing share buyback bonanza have the potential to further boost total returns from UK equities,” Russ said.

Russ said the index offered exposure to global growth and inflation at the same time. He said the FTSE is packed with cyclical companies, commodity businesses, and financial firms, with steady income support from utilities and consumer staples.

He added that analysts have started lifting earnings forecasts for 2026 and 2027, which he said differed from the trend seen over much of the past few years. “Such momentum, if it continues, could help give further impetus to the FTSE 100, and the wider UK equity market in the coming twelve months,” he said.

Chris Rush, investment manager at Kingswood Group’s IBOSS, also said he sees upside for UK equities, while stressing balance. Chris said that British stocks remain undervalued. “Despite strong performance this year, UK equities remain relatively unloved and attractively valued compared with their historic averages,” Chris said in an email.

He added that these factors support holding UK assets as part of a diversified portfolio as uncertainty builds into the year ahead.

UK GDP data shows economic growth revisions, tax pressure, and slowing momentum

Britain’s real GDP increased 0.1% in the third quarter, covering July to September, unchanged from the first estimate. Output stood 1.3% higher than the same quarter a year earlier. Compared with Quarter 4 of 2023, the level of GDP in Quarter 3 of 2025 was 2.9% higher, slightly revised down from 3.0%.

Economic growth in Quarter 4 of 2024 was revised up by 0.1 percentage points, while growth in April to June 2025 was revised down by 0.1 points to 0.2%. Updated input data drove those changes.

Officials also corrected a previously announced HMRC trade in goods error dating back to March 2024 and reviewed how the three GDP measurement approaches were balanced from 2024 onward.

Early GDP estimates remain subject to revision. Analysis showed the average revision over three years sits around plus or minus 0.24 percentage points. More detailed information enters the system through annual supply and use balancing, published in Blue Book 2025.

The ONS said the saving ratio dropped 0.7 percentage points to 9.5%, the lowest level in over a year, as tax increases and inflation reduced real household disposable income.

At the same time, household consumption rose 0.3% after flat growth in the previous quarter, the fastest pace in a year.

Rachel Reeves, the finance minister, raised taxes in her first 2024 budget, including on some forms of wealth income, with most of the burden falling on employers.

Britain posted the strongest growth among G7 economies in the first half of 2025, alongside Japan, before slowing amid months of uncertainty over possible tax increases ahead of Rachel’s second budget on November 26.

Last week, the Bank of England said it expects zero GDP growth in the October‑to‑December period, while estimating the underlying pace of growth at about 0.2% per quarter.

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