Insights – Booming United Kingdom
August 2026
Key Takeaways
- Donald Trump and Andy Burnham may not believe the UK is booming, but investors are increasingly feeling like the UK market is. Takeover activity in the UK has reached fever pitch, with more than £70bn of bids tabled for UK-listed companies so far this year.
- The catalyst for this activity has been the attractive valuations of UK companies after years of investors shunning the market, that left companies at valuations well below that of their global peers.
- The UK market continues to trade at a 24% discount to global equities on an earnings basis, with nearly every sector in the UK trading at substantial discounts to its global peers, there is significant scope for takeover activity to continue.
Booming United Kingdom
With Donald Trump referring to the UK as a “poverty-stricken disaster”, it feels both somewhat strange to write the headline “Booming United Kingdom”. The headline may annoy Andy Burnham more than Donald Trump, as he may not feel that the UK is booming, investors in UK assets are increasingly seeing signs of a different story, that the UK equity market is different from the UK economy.
GDP growth this year is expected to come in at around 1%, as the country continues to struggle with weak productivity, high energy costs, a heavy tax burden and elevated levels of public debt. Together, these factors are creating a stagflationary environment, where the private sector is not generating sufficient growth and the government is unable to provide meaningful fiscal stimulus because it is constrained by high debt levels. With further borrowing appearing to be off the table unless the government is willing to risk a revolt in the bond market, the outlook for the wider economy remains challenging.
However, for investors in UK assets, it is starting to feel as though a boom is taking hold, as takeover activity in UK-listed companies continues to surge. Year to date, companies with a combined value of more than £70bn have received takeover bids, with 11 transactions valued at more than £1bn. This flurry of deal activity highlights the value on offer in the UK market, with bidders from around the world willing to pay substantial premiums to acquire companies across a wide range of sectors.
Santiago View
Firstly, it is interesting to consider how the UK market came to be regarded almost as a pariah within global equity markets. Conventional wisdom suggests that foreign investors have been deterred from investing in the UK by the political instability that has engulfed the country and the stagnant economic backdrop that has emerged. It is difficult to argue that these have not been contributing factors, but it is equally important to consider the role of UK investors, who also appear to have abandoned their home market. Sales of UK equities by domestic retail investors have been substantial in recent years.
In 1981, UK investors owned 96% of the domestic equity market. Today, that figure has fallen to just 41%. UK pension funds, once the bedrock of the UK equity market, now have only around 1% of their assets invested in listed UK equities. It seems that UK nationalism does not extend to investing in the country’s own stock market.
With many investors, both in the UK and overseas, overlooking the market because it represents only around 3% of the global equity index, valuations have become extremely depressed, as shown in the table below. The UK market currently trades at a 24% discount to the global equity market, and almost every sector is available at a discount to its global peers
However, the lack of interest in the market and the subsequent depressed valuations did not change the fact that there are some great businesses in the UK. It isn’t a surprise to us that private equity and industry investors have decided to step in and purchase UK assets at attractive valuations, as it always felt inevitable that the value within the market would be crystallised at some point.
Spotlight – Odyssean
Odyssean is an investment trust that focuses on investing in UK mid-cap companies. It has a concentrated portfolio and holds no more than 25 investments. It is focused on investing in growth sectors in the UK – TMT, industrials, Healthcare and Business Services.
It is benefiting from the increased M&A activity in the UK, with the following holdings having been subject to bid activity recently:
- Gooch & Housego – A global leader in photonics technology, which is subject to a bid from Arlington Capital Partners.
- Blackline Safety – A leader in safety technology, particularly gas detection, which is subject to a bid from Francisco Partners.
- Spire Healthcare – The UK’s largest private hospital operator, which is subject to a bid from Toscafund Asset Management.
Conclusion
The surge in interest from private equity and industry buyers in UK assets has come at a time when many view the economy as being at one of its darker moments. This reinforces the fact that investors shouldn’t become too preoccupied with the economic performance of a country and should instead focus more on the investment opportunities available.
The investment opportunity in the UK was, and still is, investing in high-quality businesses at attractive valuations.
Disclaimer
The information in this article is not a recommendation or investment research. It does not purport to be financial advice and does not take into account the investment objectives, knowledge and experience or financial situation of any particular person. This article has been produced and issued by Santiago Investments. It does not purport to be comprehensive. It is strictly for information and discussion purposes only
| Warning: The value of your investment may go down as well as up. You may get back less than you invest. |
| Warning: Past performance is not a reliable guide to future performance. |
