Why UK investors are backing British stocks in 2026

Chancellor Rachel Reeves may get her wish for investors to back British stocks in 2026 after a survey revealed more than half are planning to back home-grown shares next year.

Reeves is pushing for more money to go into the UK economy, with plans to curb the cash ISA allowance for under-65s from April 2027 and a push to encourage more public listings on the London Stock Exchange.

While UK stocks are not always the most popular stocks purchased by DIY investors, research by investment platform AJ Bell found 57% of retail investors say they are considering investing in UK shares in 2026.

It comes as UK stock markets have hit record highs in recent months, with the FTSE 100 breaking the 9,000 barrier.

But there have been concerns about the lack of companies listing in London, while UK shares have lagged their US counterparts.

This has so far deterred many investors, with UK equity funds experiencing net outflows for much of 2025.

But Dan Coatsworth, head of markets at AJ Bell, said there are strong reasons for investors to back UK shares. “The UK’s FTSE 100 is on track to achieve its best year on record since the global financial crisis in 2009, beating the S&P 500 and Nasdaq year to date with a 22.2% total return,” he said.

“This performance has demonstrated to investors that the UK stock market still has a lot to offer, despite accusations of being stuffed with old economy companies. It has a wealth of stocks that offer steady earnings growth, generous dividends and plenty of jam today.”

Why UK investors are backing British stocks in 2026

A lack of artificial intelligence (AI) technology companies in the main UK indices has held back sentiment towards the the UK stock market compared with the US.

But amid talk of a potential AI bubble, Coatsworth suggests the UK has the antidote to the volatile technology space.

He said: “Sectors like insurance, utilities and consumer goods enjoy predictable earnings and they can help to take the drama out of an investment portfolio. That’s a welcome quality in an uncertain world.

“With so much talk around whether US tech stocks are spending too much money on AI and when they might see a financial return, it’s only natural for UK investors to seek solace in other places, and in brands they know and trust.”

AJ Bell’s data shows the top UK stocks of 2025 include established brands and top dividend payers.

Insurer and pension provider L&G (LON:LGEN) took top spot but there was also space for defence stocks like second-place Rolls-Royce (LON:RR.) and fifth-placed BAE Systems (LON:BA.) as well as financial stocks such as Aviva (LON:AV.), HSBC (LON:HSBA), M&G (LON:MNG) and Phoenix Group (LON:PHNX).

“The UK stock market is full of companies that provide everyday goods and services, meaning the public live and breathe these names. That familiarity is important when it comes to investing,” said Coatsworth.

Another factor in the UK stock market’s favour is valuations. UK share valuations also remain attractive versus the US despite a re-rating in the FTSE 100 since late 2023. During this time the index has risen from around 10 times forward earnings to around 13 times.

In comparison, the S&P 500 trades on 22 times earnings.

Coatsworth added: “That valuation gap is a key reason why overseas investors are showing more interest in the UK and it’s also why we continue to see plenty of takeover activity involving UK stocks.”

Investing in global stocks

Investing solely in the UK would be a risky strategy though and diversification remains important.

AJ Bell’s research shows 52% of its investors also plan to back global shares, with 35% favouring the US.

Around a fifth are planning to invest in bonds and money market funds, while a quarter are considering multi-asset funds.

Coatsworth said there is greater interest for investments outside of the equity space.

“Interest rates have been trending lower on cash savings held with banks and building societies, encouraging more people to switch back into investments in search of higher returns.

“Not everyone wants to put all their money in higher risk investments, hence we’ve seen lower risk investments like bonds and money market funds grow in popularity and that trend looks to be gathering momentum as we move into 2026.

“Multi-asset funds have struck a chord with members of the public looking to spread their risks across different assets through a single investment.

“An investor can feast on a menu of shares, bonds and more through one fund, and leave asset allocation decisions to the fund provider rather than sweat over it themselves.”