The UK Stock Market

As a UK investor, you’ll probably be most familiar with your national stock market. It is full of household names, which can offer a certain reassurance that you know the businesses in which you are investing.

Shares here are traded on the London Stock Exchange, and are split across two primary markets – the Main Market and AIM – with indices tracking the performance of different elements. The FTSE 100 Index tracks the largest 100 companies (which make up around 80% of the stock market by value*), followed by the FTSE 250 Index. Combine the two and you get the FTSE 350 Index. Smaller companies make up the remainder, and bring the total market capitalisation of the market to around £3,500bn. AIM (Alternative Investment Market) is composed mainly of smaller, high growth companies and now boasts over 1,000 participants (Source: ftse.com as at 31 Dec 07).

Recent years have seen average company profits grow, supported by strong economic growth, merger and acquisition activity and efficient management. Indeed, some of the largest FTSE 100 companies are global leaders in their fields. This means future progress is increasingly influenced by events in other parts of the world, and many UK companies are now as dependent, if not more so, on international business than they are on the UK. The UK is traditionally seen as a 'defensive' market because it is dominated by banks, pharmaceuticals and oils, which are less vulnerable to the economic cycle.

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