The UK’s flagship share index celebrated the start of the new year by nudging above 10,000 points for the first time last week, sealing a year-long rally which saw it rise more than 20% in 2025.
The FTSE 100, which is made up of the UK’s largest listed companies by market capitalisation, hit 10,046 points in early trading on Friday, a rise of 23.3% from 2024’s closing price.
Among the biggest risers were the defence and aerospace companies Rolls-Royce, Melrose Industries and Babcock International on continued uncertainty around the Ukraine-Russia war.
Simon French, the chief economist at Panmure Liberum, said it was a sign of things to come in 2026. “Mining, oil and gas and defence companies have come back into favour, because we’ve taken a fresh look at things like ESG [environment, social and governance],” he said.
“For a while, there was an evangelical move towards, ‘we can’t possibly buy a defence company or an oil company’ – well, it turns out we need those things.
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“To some extent, there’s been a de-cancelling of the UK market.”
However, other companies have not fared so well. In December, the London Stock Exchange announced the relegation of the advertising giant WPP from the FTSE 100 after nearly 30 years on the index. The company’s market value has fallen to just £3.1bn, from a peak of £24bn in early 2017, as the multinational faced significant client losses and struggled to keep up with developments in AI.
Strong trading in the FTSE 100 is not always a sign of wider strength in the British economy. Although figures from the Office for National Statistics (ONS) published in mid-December showed inflation had fallen to a lower-than-expected 3.2% in November, UK growth is still slow, with the latest figures showing gross domestic product rose just 0.1% in the third quarter of 2025.
British shares were, to some extent, helped by the surge in valuations of tech stocks in the US. Although just 3% of the FTSE 100 is made up by technology companies, French said investors had turned to the UK market to spread their investments. “The UK market is your diversification play away from AI,” he said. “If anything, the FTSE 100 is a hedge.”
Photograph by Henry Nicolls/AFP via Getty