UK equities poised for growth after 2025 earnings bottom |

Published: Friday, October 17, 2025 · 9:48 AM | Updated: Friday, October 17, 2025 · 9:48 AM

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Investing.com — UK equities are expected to see an improving earnings outlook despite current challenges, according to a new report from UBS Switzerland AG.

UBS forecasts UK corporate earnings will contract by 3% this year before reaching a bottom in 2025. The bank then projects a significant rebound with 5% growth in 2026 and 15-20% growth in 2027.

TheFTSE 100 has performed strongly this year despite weak economic growth, a strong British pound, and higher-for-longer interest rates. UBS notes that just five companies in defense, healthcare, banking, and tobacco sectors have contributed nearly half of the MSCI UK index returns.

Matthew Gilman, CIO Equity Strategist at UBS Switzerland AG, expects returns to broaden as the economic outlook improves. The bank has set FTSE 100 targets of 9,600 by December 2025 and 9,800 by June 2026.

UBS recommends selective exposure to UK equities, focusing on three key areas: structural transformation beneficiaries (IT, industrials, utilities), high-quality exporter laggards, and select exposure to monetary and fiscal policy.

The bank recently upgraded utilities to “Attractive” due to structural growth exposure to rising power demand from data centers and electrification at reasonable prices. Real estate is also expected to benefit from anticipated rate cuts.

In its upside scenario, UBS sees the FTSE 100 potentially reaching 10,500 by June 2026, driven by progress on US trade deals, US investors diversifying into UK assets, supportive policy responses, higher commodity prices, or a weaker sterling.

The downside scenario projects a possible drop to 7,000, which could result from a global economic downturn, higher inflation keeping interest rates elevated, lower commodity prices, or further sterling strength.

Despite the positive outlook for UK equities, UBS maintains a relative preference for US and Asian markets, citing their greater exposure to transformational innovation opportunities.

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