Budget airline easyJet has become the latest British company to be subject to a takeover bid. It follows the pattern of the past decade, whereby many good UK companies have been taken out by private equity or bought up by competitors. It has been one of the most visible signs of the slow erosion of the UK market in the wake of Brexit.

While there are other culprits – Covid, the US technology boom – Brexit weakened sentiment towards UK assets and depressed its currency. The pound has never recovered its pre-Brexit level against the dollar and euro. This left UK businesses cheap and vulnerable to takeover. Greene King, Fuller, Smith & Turner, DS Smith, Britvic, Hargreaves Lansdown and Spectris are among the UK-listed businesses that have left the UK market. The impact has been even more profound among small and mid-cap companies, which have fallen more than their large-cap peers.

That said, had UK companies not been subject to this M&A activity, the relative performance of the UK market might have been worse. The UK stockmarket has seen outflows of $160bn since 2016*. External buyers have been willing to buy UK companies where international and domestic investors have not, helping support the market amid widespread selling pressure.

While the past decade has undoubtedly been grim, 2025 brought some hope that the UK had turned a corner, and finally put its recent woes behind it. The FTSE 100 in particular showed strong performance, led by mining, financials and defence.

Broadening out?

The question is whether this strength can spread beyond a handful of names. The UK market is struggling with the same concentration problem as many major markets.

Victoria Stevens, manager on the Liontrust UK Micro Cap and UK Smaller Companies funds, said: “The UK index has become exceptionally concentrated, given the large-cap outperformance of recent years. Half the FTSE 100 weight is in 10 stocks and a quarter is in three stocks.”

She says the market has had its own equivalent of the magnificent seven – companies such as Rolls Royce or HSBC**.

Stevens is clear there is still plenty of choice in the UK: “There are a wealth of other exciting businesses that we can pick from. Innovative British industrial businesses, data-rich capital-light technology businesses, platform businesses, diverse and varied financial services. The UK market is still broad and deep, and there are plenty of opportunities for active managers.”

Alex Savvides, manager of the Jupiter UK Dynamic Equity fund, said that a combination of M&A, buybacks and the lack of an IPO pipeline has reduced the supply of UK equities, but there will be a “survivors’ party” at some point, “where demand for the limited supply of equities will do amazing things to the valuations”.

“Of course there are issues in the UK. You need to choose selectively. We do have a skewed index. We are quite interest rate and inflation sensitive. The returns we’ve had have been delivered by a handful of stocks. I wouldn’t buy the index necessarily, but looking at the components, it’s remarkable the value you can find.”

He says the idea the UK is a dinosaur market with no global leaders is false. He also takes issue with the view the UK is over-regulated and non-competitive. He believes positive changes made by the London Stock Exchange haven’t necessarily been realised yet.

Low confidence

Both managers agree the UK is still suffering from an image problem. While international and domestic sentiment has improved slightly, the latest round of political gyrations has done little to inspire confidence.

Savvides said that politics is the swing factor for international investors. “Going back to Brexit, you can trace the outflows back to that decision and that point in time. I don’t think we’ve managed to convince anyone that we’re better where we are post-Brexit.”

He believes the UK can muddle along, but sees no imminent revival in sentiment**.

Nevertheless, Jeremy Smith, manager on the Columbia Threadneedle UK Equity Income fund, said: “There are encouraging signs that the long-term structural selling of UK equities by major asset allocators is fading. The UK is becoming a more attractive place to invest. While concerns around government debt and inflation persist, robust corporate earnings and large-cap focused demand have supported returns. This performance underscores why UK equities deserve a place in a well-diversified portfolio.”

He said UK equities have “shock-absorbing qualities” versus their peers, “with its defensive cohort, exposure to hard commodities that are seen as inflation hedges, and profusion of hard assets that have historically stood it in reasonable stead during such bouts of global risk aversion. In addition, households’ Covid-era “piggy banks” are still largely intact, and, given the rise in house prices, there is potential to draw on home equity.”

Savvides continues to see a wealth of opportunity in the UK market for his business turnaround approach. Companies are still adjusting to a higher interest rate and inflation environment, which has seen them push through change. “It is a fantastic period to be a value change investor,” he said.

The Liontrust funds take a multi-cap approach, but they are finding the best opportunities further down the cap scale. “Valuation anomaly has become staggering. It’s already staggering that quality businesses can be trading on multiples cheaper than the wider market,” said Stevens.

Investors don’t have to look hard to find value in the UK market. While sentiment is still weak, there are signs that it is stabilising. After nearly a decade of grim headlines, chinks of light are emerging in the UK.

*Source: Morningstar, The Brexit Decade

**Source: A Spotlight on UK Equities, 9 April 2026

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