OpenClose
Andy Raikes

Market Outlook

UK Outlook

Outlook
12 October 2025

By

Portfolio Manager, TT UK Equity Strategy

Latest UK economic and market outlook. 

clock

After the extreme uncertainty and volatility that was caused by the initial US tariff proposals back in the spring, equity markets globally have enjoyed a period of relative calm and steady appreciation. This has in part been due to a degree of greater clarity on what these policies will ultimately look like and therefore what their implications will be, although it is still clearly too early to fully assess the latter. In any event, economic momentum globally has been resilient, confounding some of the worst fears at the peak of the uncertainty. Interest rates have also continued to come down in certain economies, notably the US and the UK, which has been supportive.

Whilst global economies have proved resilient, the UK economic picture has remained relatively subdued through the first half of the year amid ongoing cost pressures on households and firms alike. With a widening fiscal hole to fill, there are understandable concerns that the upcoming Budget will add to the pressure by delivering further tax increases, as was the case this time a year ago. Against this backdrop, and recognising that consumer confidence and appetite for domestic stocks will likely remain relatively weak until we at least get the other side of the Budget at the end of November, we have become more circumspect about domestic discretionary exposure in the UK, and this was partly the rationale for reducing positions like Jet2 earlier in the year, as well as Howdens during Q3.

That said, there is no doubt that pessimism going into the Budget has become more widespread as it comes closer, which has resulted in broad-based weakness in many domestic names, particularly mid-caps, and especially in names viewed as direct losers from potentially rising taxes. In many cases this provides scope for the Budget to act as a clearing event, where the market is pricing in too bearish an outcome on specific tax increases – banks and gaming being two good examples, in our opinion. As we move closer to the Budget and out the other side, there are a number of stocks in the portfolio where we have already or will be looking to increase exposure. These would include Greencore, which has significantly derated despite very strong operational momentum, and Entain, where we anticipate rising taxes but think the market is pricing in too harsh an outcome, as well as banks.

Obviously the domestic economy is not relevant for much of the UK stock market, with many large sectors driven almost entirely by international trends, and needless to say we remain very well invested in these names and sectors, including mining, consumer staples, other financials, healthcare, defence & industrials.

Overall, we continue to run a balanced portfolio, with a beta close to 1. We retain substantial exposure to Industrials. Within this, construction remains a big position, skewed towards infrastructure plays such as Balfour Beatty, CRH, and Kingspan. We also continue to favour ‘defensive growth’ businesses such as DCC, Serco and Experian, as well as continuing to like Defence.

We remain overweight Consumer Discretionary, but with the exposure skewed to relatively defensive names such as Compass, CVS and Irish housebuilder Glenveagh.

Elsewhere, we are overweight mining, particularly gold miners. Our holdings in Endeavour and Pan African Resources trade at extremely attractive FCF yields at spot gold prices. Whilst gold has rallied substantially, the positive drivers remain in place and the price of gold could rise further. That said, even without assuming a higher gold price, we see strong rerating potential in the names we own.

Meanwhile, exposure to Utilities was reduced as we sold SSE and reduced Telecom Plus.

More generally, although domestic names are likely to remain subdued ahead of the Budget, we have maintained our overweight to mid-cap stocks as this is broadly where we see the best value in the market. 

Important Information:

Nothing in this document constitutes or should be treated as investment advice or an offer to buy or sell any security or other investment. TT is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA).

If you would like information on TT’s products, please contact:

Receive our insights

Sign up to receive regular investment updates and insight about products that interest you:

Sign up now