FTSE 100 at 9,000: A market milestone that masks a flatlining economy

In a landmark moment for Britain’s financial markets, the FTSE 100 surged past the 9,000-point threshold for the first time in its four-decade history today, buoyed by investor optimism and in reaction to a wave of anticipated reforms aimed at revitalising the City.  

The index peaked at 9,016.98 in early trading, marking a year-to-date gain of over 10% and underscoring renewed global confidence in UK equities. As Jonathan Unwin, UK head of portfolio management at Mirabaud Wealth Management, put it, “the UK market is currently acting as something of a safe haven amid global trade uncertainty in recent months, thanks in part to the UK quickly striking a trade deal with the US. The agreement, reached in May, has given the UK a relative edge over its European peers, still grappling with tariff uncertainty and a short-term attraction for investors.“  

The FTSE 100 high also came just hours after the Financial Conduct Authority (FCA) unveiled sweeping changes to the rules governing capital raising by listed companies. The reforms include shorter IPO timelines and cheaper requirements to list; simplified bond issuance for retail investors; and a new Public Offer Platform for growth companies seeking over £5 million. According to Simon Walls, executive director of markets at the FCA, the reforms are intended to provide a “stripped back” process that would make it easier and less expensive for quoted businesses to raise funds while bolstering the international competitiveness of the City of London 

The FCA’s announcement also coincided with the broader government efforts to reinvigorate the UK’s capital markets, which have faced declining listings and investor engagement since 2021.  

The Chancellor Rachel Reeves is under pressure to demonstrate that her government can deliver economic growth without resorting to politically risky tax hikes. Today, she met with financial services leaders in Leeds to outline her Leeds Reforms, a strategy aimed at reducing regulatory burdens and positioning financial services “at the heart of the government’s growth mission” in her Mansion House speech.  

The FTSE’s rally reflects broader market optimism, driven in part by expectations of a Bank of England interest rate cut and the UK’s relatively insulated position amid global trade tensions. UK stocks - long seen as undervalued - are now benefiting from their relative cheapness. The FTSE 100 trades at a price-to-earnings ratio of around 17, compared to over 27 for the S&P 500. Sector composition has also played a pivotal role, with defence stocks like BAE Systems and Rolls-Royce having surged, benefiting from geopolitical tensions and increased defence spending.  

At first glance, the FTSE’s rise might suggest a broader economic resurgence, but that would be misleading. The index’s performance is largely decoupled from domestic economic fundamentals. Around 80% of FTSE 100 revenues come from abroad, meaning the index is more a barometer of global investor sentiment than a reflection of UK economic health.   

In reality, the UK economy remains in dire straits, contracting again in May according to the Office for National Statistics (ONS), after also shrinking in April. This was driven by a drop in manufacturing and confounded analysts who were expecting growth. 

As Reeves prepares to take the stage at Mansion House, the convergence of regulatory reform, market momentum, and political vision paints a picture of a government eager to reset the narrative around Britain’s economic prospects. The FTSE 100’s historic high offers a symbolic boost, but whether it marks the beginning of a sustained revival or a fleeting peak will depend on the execution of the reforms now in motion and whether it can be the regulatory incentive to restart IPO market activity.