For those looking to start investing this year - or continue an investment journey they’re already on - there remain plenty of reasons to consider companies listed on the London Stock Exchange.
While the London markets as a whole have seen plenty of companies depart over the last 12 months, some bought up and some relisting overseas, there is still a huge selection of high-class companies to research and consider buying shares in, particularly if that is in a stocks and shares ISA to reap the benefits of tax-free gains.
Some British-listed companies are notable for paying out dividends with regularity; some have higher growth prospects or a lower valuation relative to their peers, suggesting a share price rise could be on the cards in the future. Past performance is no indication of what’s ahead though and doing your own research when considering investing on the stock market is always important, as well as considering expert advice.
Whatever your investment style and long-term saving objectives, some companies will appeal more than others but London remains a good place to at least start looking and undertake your research.
Here we look at several UK-listed companies starting in the FTSE 100 - the biggest listed firms in the UK by market capitalisation - which face interesting years ahead, based on economic conditions, their business models and their performance over recent times. As with all firms, there are both positives and negatives to consider and deeper dives into their finances should always form part of any decision-making.
This article is neither investment advice nor picking out winners for the year ahead; rather framing the types of considerations beyond share price which novice investors may think about for other companies and industries, as well as showing what kind of organisations can be found on the LSE.
Diageo
With a growing dividend and decade of successful growth behind it, all was looking rosy up until about 2022 for Diageo - but the share price is down around 40 per cent since it tipped above £40 a share that year.
Amid talk of some sections of the business being sold off - Guinness is firmly off-limits, the drinks maker says, despite the Ghana Breweries arm being offloaded - changing tastes and consumer habits are an ongoing impact for Diageo. The company is also an example of how overseas matters can impact UK-listed companies: tariffs, exchange rates, local market expertise and more are all big considerations here.
A more focused delivery of its better-performing brands of spirits and alcoholic drinks appears to be the approach going forward and a strategy update should provide clues to the plan for existing and would-be investors alike.
Next
One of the UK high-streets well-known clothing retailers, Next have a proven business model and strong management, but they are not immune from the upcoming impact of raised labour costs.
A one per cent price hike to products is on the agenda, they announced, but that won’t swallow the whole bill, so either cost-cutting exercises or lowered profit margins are set to be forthcoming.
Most of the British high street expects 2025 to be a challenging year with national economic conditions; if Next manage to buck the trend could we see others follow their approach? Would it signify a wider sector improvement ahead? Or indeed might they capitalise further (or look to buy other brands) if rivals fall by the wayside?
The London Stock Exchange Group
Did you know you can invest in not just the London Stock Exchange itself, or the companies within it, but the group which owns the whole thing: the London Stock Exchange Group?
There’s much more to it than just the stock market; data generation and analysis is a huge part of their future, along with risk assessment, foreign exchange technology and more. And, yes of course, the stock exchange.
You’ll even earn a dividend if you hold this company - a modest one, around one per cent yield at present - but on other hand, 2024 saw a huge exodus from companies on the LSE itself. How that impacts on the group as a whole is of course another consideration, and a good example of how a company you buy shares in might not just be all about the primary brand or area you’re aware of.
What alternatives are there?
You don’t have to directly invest in individual companies, remember. And there’s more than just FTSE 100 companies to look at - they’re just the biggest 100, so naturally get more attention.
Here are a couple of additional options to consider.
AIM: Michelmersh Brick Holding
One of Labour’s early plans and pledges came in the form of wanting housebuilding to be back on the agenda, with plans to build 1.5m new houses in the next five years. More recently it appears a bet on a boom of commuter towns might be a focus, with plans to remove red tape to get infrastructure moving quicker.
Investors looking at this type of nation-wide approach might wonder which homebuilders are best-placed to benefit, while an alternative might be Michelmersh Brick Holdings: not a specific housebuilder, but the brick-maker for many.
But, before that seems an immediate win, inflation and other cost pressures are an issue here. Also, so much of what they might sell also depends on mortgage lenders, interest rates, willing buyers…and political plans actually coming to fruition, of course.
Another consideration is that the company is not as big - it’s not a FTSE 100 member and instead is listed on the Alternative Investment Market (AIM), a junior market for smaller companies looking for growth. Investing in AIM companies can be very different to doing so in FTSE ones: you don’t pay stamp duty, for example, and as a whole it is generally considered riskier, so make sure you’re clued up before looking at these markets.
Funds instead of companies
Funds are designed so that you get greater diversification and greater exposure to a wide basket of companies or sectors.
But there are different types of funds - actively managed or passive “tracker” funds for example - and they behave in different ways and have different fees attached.
A UK FTSE 100 tracker fund, for example, offers the chance to own a small holding in each of the 100 constituents of the market, usually for a very low fee (which therefore eats into your gains less) per year and which will automatically adjust based on future changes to the index when companies join or leave it.
How do you invest in the FTSE 100?
To buy shares in any listed company in the UK, or a tracker fund or similar product, you need to open a stocks and shares dealing account with a registered investment platform.
You can do this directly on a platform’s app or website, or sometimes within existing accounts you have - for example, the bank where you have a current account might also offer an easy set-up investing account, whereby you can detail your attitude to risk and let them manage it for you with pre-planned approaches to build a portfolio.
Alternatively, UK investors can utilise a stocks and shares ISA to do the same, which means any earnings are tax free. This always depends on your own circumstances regarding tax and which account type better-suits your needs.
In addition, you should always check fees and costs across different options open to you, as they can impact on your returns. Consulting a financial planner and taking a diversified approach to your money targets is always recommended.
When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.
