UK Stocks Look Cheap as UBS and Barclays See Buying Opportunity

TLDR

• UBS upgraded UK equities to “attractive” after a recent pullback
• UBS raised its UK earnings growth forecast to 16% for 2026, up from 11%
• FTSE 100 target set at 11,200 for December 2026 and 11,500 for June 2027
• Barclays says FTSE 250 stocks trade at a 20% discount on a price-to-book basis
• BlackRock sees UK as a “really interesting diversifier” with opportunity in banks and miners

UBS and Barclays are both pointing to UK stocks as a buying opportunity after a recent market pullback. Valuations are low, earnings are improving, and commodity exposure is giving UK companies a lift.

UBS Raises UK Earnings Forecast and Sets New FTSE 100 Targets

UBS upgraded its outlook on UK equities to “attractive” following a dip in prices. The bank raised its 2026 earnings growth forecast for UK companies to 16%, up from an earlier estimate of 11%. Rising energy prices were the main driver of that upgrade.

The bank set a FTSE 100 target of 11,200 for December 2026. It also set a June 2027 target of 11,500, up from 10,650 on September 15, 2026.

UK stocks currently trade at a forward price-to-earnings ratio of 12.4 times. That compares to the long-run median of 12.8 times since 1990.

Energy-related companies are expected to generate around 18% of MSCI UK earnings this year. UBS said risks to its earnings estimate are skewed to the upside given further moves in energy prices.

Despite the upgrade, UBS still rates UK equities “Least Preferred” compared to other global regions. The bank expects earnings growth to slow to around 9% in 2027 as the commodity boost fades.

UBS said it prefers the Eurozone over the UK overall. It favors European information technology, industrials, banks, consumer discretionary and health care.

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Barclays and BlackRock Also See Value in UK Stocks

Barclays described British equities as “unloved but not a bad place to hide.” The bank said near-term concerns around AI and oil could actually help the FTSE 100.

Barclays highlighted that FTSE 250 stocks are trading at around a 20% discount on a price-to-book basis. It said this discount persists even though company profitability remains healthy compared to global peers.

The bank’s top UK stock picks with the biggest upside include Rentokil, Trustpilot and Shawbrook. It favors UK industrials, financials, utilities, real estate and select consumer names.

BlackRock’s Helen Jewell called the UK “a really interesting diversifier.” She pointed to dividend-paying sectors, banks and mining companies as areas of opportunity.

Jewell’s team holds an overweight in miners due to elevated copper prices. She also noted that some UK stocks sold off in the “AI loser” trade still offer attractive value on fundamentals.

Risks Remain on Both Sides

UBS outlined a downside scenario where the FTSE 100 could fall to 7,700 by June 2027. Risks include energy disruption in the Middle East, trade wars returning, lower commodity prices and sharply higher bond yields.

Higher interest rates remain a near-term risk to UK equity valuations, UBS said. But it believes improving earnings can more than offset higher discount rates.

The UK also faces a difficult domestic backdrop. That includes a cost-of-living crisis, rising inflation and the highest government borrowing costs in the G7.

The new UK government is due to present its first budget next month. It faces the challenge of balancing fiscal discipline with higher defense spending and household support.