UK equities: while stocks last

UK plc is on sale. Strategic buyers, private equity and company management teams are all taking note of knock-down valuations for high-quality UK businesses. Yet many domestic buyers continue to overlook the opportunity. Like all good sales, it may not last forever. 

Overseas buyers can’t snap up UK companies fast enough. The list is long. In July alone, facilities management company Mitie reached an agreement to be acquired by private equity-backed competitor OCS Group in a deal valued at £3.1bn, Segro agreed a £13.5bn takeover from Prologis , EasyJet was bought by Apollo Global Management, a US private equity firm, while Rotork was absorbed by ABB. 

According to Deutsche Numis data to the end of July, there have been 27 potential and confirmed takeover approaches for UK companies, with a combined value of more than $70 billion.

The rationale for this enthusiasm is clear. International investors know they can acquire quality, global franchises at compelling prices. Goldman Sachs’ analysis of European strategic M&A shows that US acquirers have concentrated a disproportionate share of their European acquisition spending in the UK. Most of these deals have been agreed at a premium to the current market price, with the average takeover premium reaching 39%. 

A preference for quality

These bids have had certain characteristics. Activity has been skewed to larger assets – 13 of the 27 bids since the start of the year have been for companies with a market cap greater than $1bn. Equally, while public markets have been indifferent to quality companies with durable competitive advantages, strong cash flow and visible earnings, these are often the types of businesses sought by international investors. 

Another notable theme is that many of the companies attracting interest are global businesses rather than domestic economic plays. Around 75% of FTSE All-Share revenues are generated overseas. In effect, buyers are acquiring global franchises through a market that remains valued at a discount to international peers. Public markets may have fallen out of love with dependable compounders, but strategic acquirers continue to recognise the value of these businesses. 

The companies themselves also appear to have real faith in their own businesses. Corporate buybacks remain another important source of demand for UK shares. Corporate share buybacks are continuing at a healthy pace, supported by strong cash generation, resilient balance sheets and management confidence. Our research shows that with the buyback yield of the UK market above 2% and a dividend yield exceeding 3%, total shareholder distributions from the UK market are above 5%. 

The catch

This support from international buyers, private equity and the companies themselves is a ringing endorsement for the UK market. They have undoubtedly contributed to a strong 12-month performance for UK equities, with the FTSE 100 almost keeping pace with the AI-heavy S&P 500 over the year. 

But there is a catch. If we rely on this group of buyers indefinitely, we’re going to run out of great companies in the UK market. There’s plenty to do to build deeper markets, and more engaged domestic investors, not least financial education. Scrapping stamp duty, which creates a range of disincentives in the system, would be helpful, as would increasing participation from domestic pension funds. We hope these are on Andy Burnham’s to-do list.  

UK economic growth

In the meantime, investors may be tempted back to the UK market by an improvement in the macroeconomic climate. Majority of UK companies draw their revenues from overseas, but the domestic economic picture can still affect sentiment towards the UK stock market. The UK economy has been lacklustre, but has had a surprising spring in its step since the start of the year. 

The most recent round of UK GDP growth data shows the UK as the fastest-growing economy in the G7 for the first half of the year. Most importantly, that growth was broad-based, with 15 of the economy’s 20 subsectors expanding between April and June, according to the Resolution Foundation. GDP per capita grew by 0.4% over the quarter, suggesting improving living standards. This may finally give UK households the confidence to spend some of the large savings pots they have built up in recent years. 

There are still concerns. The war in Iran remains a threat, as does Chancellor Healey’s first budget in October, but the UK economy has proved far more resilient than many feared in the early part of 2026. The message has been slow to reach investors, but UK equities are growing increasingly hard to overlook. 
International buyers, private equity groups and company management teams continue to view the UK market as one of the most attractive hunting grounds for quality assets. They recognise what public markets are overlooking: many UK-listed companies are high-quality global franchises that are trading at unjustifiably low valuations. Unsurprisingly, they are swooping in to secure those assets before the sale ends.

Investment objective:
Targeting growth in income and capital from a portfolio primarily invested in UK companies that meet the company’s sustainable and responsible investing criteria.

Important information
Risk factors you should consider prior to investing:

• The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.

• Past performance is not a guide to future results.

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Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. The company is authorised and regulated by the Financial Conduct Authority in the UK.

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