For most of the last decade, the investment case against the UK has had plenty of material to work with: a referendum with a long aftermath, a run of prime ministers, a fiscal position that constrains every government inheriting it, productivity that refuses to improve, and a stock market that international investors could simply decline to own without anyone much noticing. UK equity funds have seen persistent outflows for years. London’s valuation discount to global peers widened and stayed wide.
What gets lost in all of this is that “the UK economy” and “the UK stock market” are not the same thing. A great many companies listed on the London Stock Exchange earn most of their money somewhere other than the UK or at least sell to companies that do. Their revenues are set by construction activity in North America, by corporate technology budgets in Germany and by hiring in the United States and Japan. What may happen with the Ofgem cap in October is, for these businesses, close to irrelevant. Nonetheless, they are priced daily off a domestic narrative, by top-down asset allocators and investors who have decided that a London listing is a statement about a company’s prospects rather than simply a fact about where its shares happen to be registered.
Fortunately, that gap has begun to close this year, driven by two factors at once.
The first factor is straightforward, continued operational delivery. Keller, for example, which constructs the foundations that large construction projects sit on, upgraded full-year guidance materially ahead of consensus. Around 60% of its revenue comes from North America, and the driver was infrastructure and data centre work. Similarly, Computacenter, which supplies and manages the technology that large organisations run on, guided first-half profit to roughly double last year’s £81.5 million on hyperscaler demand in the United States.
4imprint, which sells branded promotional merchandise, is to all intents a North American business that happens to file its accounts in sterling.
What these companies have in common is not an industry but a geographical fact: none of them requires a pick-up in UK GDP in order to prosper, and yet for several years the market has priced them as though they did.
The second factor is that private capital buyers appear to have reached this same conclusion. Zurich, the Swiss insurance group, agreed terms for the Lloyd’s of London specialist insurer Beazley in February at up to 1,335p a share, close to 60% above the undisturbed price. EQT, the Swedish private equity group, reached an agreement in June on Intertek, which tests, inspects and certifies products and supply chains worldwide, at £60 a share in cash plus the final dividend, valuing it at around £9.3 billion. And in July, ABB, the Swiss-Swedish automation and electrification group, agreed to acquire Rotork for just over 500p per share in cash, valuing the Bath-based maker of the electric actuators at roughly £4.1 billion, a premium of over 60% to the previous evening’s close.
Across the market, announced takeovers of UK-listed companies reached around £39 billion by the middle of this year, already ahead of the whole of 2025, at an average premium near 45%.
The last few years have been an awkward period in which to hold high‑quality, cash-generative, well-run companies at sensible valuations, because the market focused on a small number of very large businesses instead. However, patience with this approach has started to yield results.
When ABB set out why it wanted to acquire Rotork, it pointed to execution, engineering quality and customer trust. Those are precisely the characteristics investors should identify in advance: pricing power that survives a downturn, customer relationships measured in decades, governance that produces no surprises, and profits that convert reliably into cash.
We would rather, though, that such recognition arrived without the company having to leave the market altogether. Beazley, Intertek and Rotork are three good businesses on their way out of London, and in time the proceeds will need redeploying into a market that contains three fewer candidates than it did at the start of the year.
What has changed is not the UK economy. It is that the distance between what these businesses are worth and what the market will pay for them is finally being recognised and closed. This reinforces two long-held beliefs: that maintaining exposure to unfashionable but undervalued markets like the UK is essential for when leadership rotates, and that responsible, valuation-disciplined stockpicking can add meaningfully to outcomes.
Either way, our philosophy is unchanged: look for genuinely good businesses, buy them at a sensible price, and be patient enough to still be holding them when everybody else works it out.
Elliot Farley is chief executive officer and manager of the T. Bailey UK Responsibly Invested Equity fund. The views expressed above should not be taken as investment advice.