The FTSE 100 Hits Record Highs – What’s Driving the UK Market in 2025?

For years, the UK stock market has been seen as the “unloved” option for global investors, while the US has dominated market returns. But sentiment appears to be shifting and 2025 has been a year of renewed strength for the UK.

The FTSE 100, the index of the UK’s 100 largest companies, has reached new record levels, recently surpassing 9,000 points for the first time. As of 21 July 2025, the index has returned an impressive 12.66% year-to-date, outperforming other major markets like the US, which has risen just 0.54% in sterling terms.

So what’s behind this resurgence?

Why Is the FTSE 100 Rising?

Several key factors have helped push the FTSE 100 higher this year:

• Aerospace & Defence Strength – Companies like Rolls-Royce and BAE Systems have surged in value, supported by the UK government’s commitment to increased defence spending.

• Banking Sector Gains – Higher interest rates have boosted profits for major UK banks, giving further support to the index.

• Global Trade Deals – Despite wider trade tensions, the UK became the first country to finalise a trade agreement with the US, securing reduced tariffs and opening opportunities for exporters.

• Policy Reforms – The government, led by Chancellor Rachel Reeves, has introduced reforms designed to encourage investment in UK companies and stimulate growth across the domestic market.

  
  

Together, these factors have shifted sentiment towards the UK, driving the FTSE 100 to record levels.

How Can Investors Access the UK Market?

There are different ways to gain exposure to the UK stock market, depending on your goals and appetite for risk.

One option is through index tracker funds, which aim to replicate the performance of a benchmark like the FTSE 100. These are typically lower-cost investments that follow the market rather than trying to beat it.

Another approach is via actively managed funds, where investment managers select individual UK companies they believe will outperform. This strategy carries higher costs but may offer greater potential for outperformance.

It’s important to remember:

• All investments can rise and fall in value, and you may get back less than you invest.

• Past performance is not a reliable guide to the future.

• Any new investment should be considered within the context of a diversified portfolio.

Final Thoughts from Cleveden Park Wealth

The FTSE 100’s strong performance in 2025 is a reminder that markets move in cycles — and even previously “unloved” regions can return to favour. For long-term investors, the UK market continues to offer opportunities, particularly when combined with a globally diversified strategy.

If you’d like to explore how UK equities could play a role in your wider investment plan, contact our advisers today for tailored investment planning advice.