Easyjet adds to UK equities flight fears

EasyJet has entered talks with the US private credit group Castlelake and will share “limited commercial information” as it holds out for “a more attractive proposal” after a fourth rejected bid valued the airline at £4.9bn.

City analysts say raising the current bid of £6.50 a share to over £7 might clinch the deal. Castlelake has gone public with an appeal to shareholders, including Stelios Haji-Ioannou, the founder and former chairman, who holds a 15% stake. If he is persuaded to sell, it is quite possible Luton-based easyJet will soon fly off the FTSE 250.

This is not the first time this year that a UK firm has toyed with selling up. Slough-based Segro, the FTSE 100-listed owner of Europe’s biggest hub of data centres, this week rejected an “opportunistic” approach from US rival Prologis for £12.6bn. Other FTSE names, including the laboratory testing company Intertek and insurer Beazley, have accepted bids. Foreign acquirers have represented about 86% of total UK deal value so far in 2026, their highest share on record, according to AJ Bell. American buyers accounted for over half of these.

“Everybody who does a screen of European takeover targets automatically ends up with a list of UK companies, because the UK is particularly cheap even in the European context,” said Joachim Klement, investment strategist at Panmure Liberum.

Private equity companies are flush with cash and easyJet’s share price has been hit by the conflict-driven disruption to aviation. But why is UK plc as a whole trading at a discount? Some, including Nicholas Lyons, chair of Standard Life and a former lord mayor of the City of London, trace the trouble back to when Gordon Brown scrapped the tax credit on dividends received by pension funds investing in UK companies. This precipitated a decades-long rotation out of stocks into gilts, bonds and, eventually, global passive funds.

“We have sleepwalked into the situation we find ourselves in,” he says. “We should have said back in 1997 that this was going to have a devastating effect on the listed UK equity market.”

Research by New Financial, a thinktank that tracks pension allocations, expects UK pensions’ total allocation to UK equities in aggregate to drop below 4% this year, compared with 15% in 2015 and 33% in 2005.

Arguably the biggest losers from this have been British savers. William Wright, founder of New Financial, notes that the performance of a pension 100% invested in equities with a 20% weighting to the UK (rather than 3% or 4% under a “global-market-weighted” approach) would have beaten all but two of the main defined contribution pension providers over the past five years.

There are, however, signs that a refreshed Labour government may be alive to the problem of declining UK equity markets. In a speech last Thursday to the British Chambers of Commerce, Andy Haldane, a former Bank of England economist who is reportedly advising Andy Burnham, noted that since 2024 the UK has lost more than 100 listed companies with a market cap of more than £100m.

“The UK should remain open to [foreign direct investment] but we simply cannot afford to allow the continuation of overseas stripping of our greatest growth assets,” Haldane said,. He also called for a more “expansive interpretation” of national security powers to block overseas takeovers.

However, one FTSE 100 chief executive cautioned that compelling UK pension funds to invest in domestic companies could have “unintended consequences” and make the companies less efficient.

Opinions vary, but it is still starkly clear that the bleed of the FTSE, and the dearth of new listings, must be remedied. It is a challenge that will fall to whoever is the next chancellor.

The FTSE executive added they “cannot conceive of the markets accepting Ed Miliband” in the post and urged: “The smart move from Andy Burnham would be to keep Rachel [Reeves] in the job for a bit.”

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