UK takeovers: The outlook for private investors in 2025

The UK stock market has emerged as a fertile hunting ground for takeovers in recent years. This has largely been driven by the steep discounts available on UK equity markets when compared to the rest of the world. After all, why wouldn’t you buy a £1 coin for 50p when presented with the chance?

This hasn’t happened by chance. A series of events, starting with Brexit uncertainty and progressing through political instability and a poor macroeconomic backdrop, have led to a structural undervaluation of the UK stocks. And while other global markets rebounded post-pandemic, the UK has failed to mirror such a performance.

One of the primary drivers of the market’s perennial discount is the fact that UK pension funds have significantly reduced their exposure to UK equities, instead choosing to reallocate their assets to bonds and global equity markets. Astonishingly, the percentage of UK equities in pension portfolios plummeted from over 50% in 1997 to just 6% in 2021.

To add salt to the wound, retail investor sentiment has been inconsistent, at best. There were substantial inflows in 2013-2015 and 2020-2021, followed by record outflows in recent years as UK investors have clamoured to access the mega returns on...