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Investing in the United Kingdom: FTSE 100 and the Post-Brexit Market
Key takeaways
- FTSE 100 is one of Europe's most geographically diversified indices in terms of revenue — a large portion of its companies' earnings come from outside the UK.
- Brexit brought permanent structural changes to UK companies' access to the European market and the regulatory environment.
- GBP/CZK currency risk is relevant when investing in British ETFs, and sterling movements can be substantial.
- The British market is historically cheap relative to the USA — the question is whether this discount is an opportunity or a reflection of structural problems.
The United Kingdom gives investors access to one of the oldest and most liquid equity markets in the world — with one of the largest concentrations of energy, financial, and consumer giants. It also carries a unique set of risks shaped by Brexit and the structural transformation of the British economy.
Economy and market: what defines the United Kingdom
The United Kingdom is the fifth largest economy in the world and one of the global centres of finance and professional services. The London Stock Exchange (LSE) is one of the oldest and most liquid in the world. The main index FTSE 100 groups the 100 largest publicly traded British companies and has a specific feature: a large portion of these companies' revenues comes from international markets, not from the domestic British economy. The FTSE 100 is therefore not a pure "UK bet" — it is a globally oriented basket of companies denominated in sterling.
Key sectors and companies
Energy is one of the largest sectors in the British market — home to global integrated oil and gas companies. Finance and insurance include global banking houses and some of the largest insurers in the world. Consumer goods and healthcare provide a defensive character. Mining and basic materials have historically been more prominent than in other developed markets.
How to invest through UCITS ETFs
- FTSE 100 ETFs — 100 largest British companies, good liquidity, strongly oriented towards value sectors
- FTSE All-Share ETFs — broader coverage of the British market including mid and small caps
- FTSE 250 ETFs — medium-sized British companies, more oriented towards the domestic economy than FTSE 100
British UCITS ETFs are available on European exchanges in EUR or GBP share classes. For an overview of equity indices in general, see What is an equity index.
Risks you need to know
GBP/CZK currency risk: Sterling can be significantly volatile, particularly in response to political and trade data. GBP/CZK movements can overwhelm the market's own performance. Brexit and its effects: Relations with the EU remain a complex variable for British companies oriented towards European exports and access to the single market. Political risk: The United Kingdom has gone through intense political instability in recent years. Valuation question: The British market has traded at a sustained discount to the USA — some view it as an opportunity, others as a warning.
FAQ
Is Brexit still affecting British equities, or is it behind us now?
Brexit is a structural change, not a one-off event. UK companies' access to the European market, regulation of financial services, and the labour market are permanently changed. For an investor the key is to track what portion of a given ETF's revenues comes from Europe.
Why is FTSE 100 considered a "value" index?
FTSE 100 composition is strongly oriented towards sectors such as energy, mining, banks, and tobacco — historically value rather than growth sectors. These companies tend to have lower P/E multiples and higher dividend yields than technology-focused indices such as NASDAQ.
How does FTSE 100 differ from FTSE 250?
FTSE 100 includes the 100 largest British companies — globally oriented, with revenues from around the world. FTSE 250 (companies ranked 101–350) is more focused on the domestic British economy and tends to be more sensitive to domestic economic data.