FTSE 100 LIVE: Stocks Rise as GDP Data Signals Mixed Growth Outlook

The FTSE 100 traded higher as UK GDP data showed modest economic growth, signaling a mixed outlook for investors. While markets advanced on takeover news and strong corporate earnings, concerns persisted over political instability, weak services sector performance, and fragile private-sector momentum. Investor sentiment remained cautious as analysts weighed economic risks, leadership uncertainty, and the future direction of monetary policy.

FTSE 100 Market Gains Driven by Economic Data and Corporate Momentum

London stocks opened higher on Thursday as investors reacted positively to fresh UK economic data and strong corporate developments. At 0825 GMT, the FTSE 100 index was up 0.3% at 10,498.61, reflecting cautious optimism despite weaker-than-expected GDP growth figures.

According to the Office for National Statistics (ONS), the UK economy expanded by just 0.1% in the final quarter of 2025. This matched growth recorded in the previous quarter but fell short of market expectations, which ranged between 0.1% and 0.2%. December GDP also grew by 0.1%, while November’s figure was revised down to 0.2%.

European markets also advanced, supported by a combination of economic data and investor confidence in corporate earnings and mergers. However, analysts cautioned that the limited growth highlighted persistent structural weaknesses in the UK economy, particularly within the services sector.

UK GDP Growth Trends Reveal Fragile Economic Momentum

The latest GDP data revealed a mixed picture of the UK economy’s health. While overall growth remained positive, momentum appeared fragile, with services, the largest contributor to UK GDP, recording no growth during the October–December period. This marked the first time in two years that services output showed zero expansion.

Growth during the quarter was driven largely by a 1.2% rise in production output, including a 0.9% increase in manufacturing. However, these gains were offset by a 2.1% decline in construction, representing the sector’s steepest fall in more than four years.

Over the whole of 2025, GDP is estimated to have increased by 1.3%, up from 1.1% in 2024. Liz McKeown, director of economic statistics at the ONS, noted that growth occurred across all major sectors during the year, though GDP per head contracted slightly in the last two quarters.

Analysts said the data reinforced concerns that the UK economy remains vulnerable, with limited private-sector momentum and subdued consumer confidence.

Political Instability Adds to Economic Risk Factors

Beyond economic indicators, political uncertainty emerged as a key concern for investors. Thomas Pugh, chief economist at RSM UK, warned that UK political instability represents one of the biggest near-term risks to the economy.

The probability that Prime Minister Keir Starmer could be replaced by the end of the year has reportedly surged from around 50% at the start of the month to nearly 70%. Pugh described the situation as increasingly resembling a matter of “when, not if.”

He highlighted three primary risks associated with potential leadership changes: a spike in uncertainty, rising government bond yields, and the possibility of new tax or borrowing measures. Such developments could further dent consumer confidence and business sentiment, particularly if fiscal strategies become unclear.

Pugh also cautioned that any leadership challenge could reopen debates over taxation, intensifying market volatility and undermining investor trust.

Schroders Takeover Fuels Market Optimism

One of the biggest drivers of FTSE 100 gains was the dramatic rise in Schroders shares, which surged 29% after the asset manager agreed to a £9.9bn takeover by US investment firm Nuveen.

Under the terms of the deal, Nuveen will pay 612p per share, including a cash component of 590p and permitted dividends of up to 22p. This represents a 29% premium to Schroders’ previous closing price, significantly boosting investor sentiment.

The acquisition reflects growing transatlantic investment interest in UK financial firms and provided a major uplift to the index, helping offset broader concerns surrounding economic stagnation and political risk.

Corporate Earnings Support Broader Market Strength

Several blue-chip companies also contributed to the market’s upward momentum. Information group Relx rose sharply after forecasting strong earnings and revenue growth for 2026, supported by increased investment in artificial intelligence functionality and disciplined cost management.

British American Tobacco gained after reporting a 2.3% rise in full-year adjusted operating profit to £11.3bn, despite a slight decline in revenue. Construction firm Morgan Sindall rallied after indicating that its 2026 results would exceed expectations, driven by strong performance in its Fit Out division.

These corporate updates reassured investors that, despite macroeconomic headwinds, individual companies remain well-positioned to deliver growth through innovation, operational efficiency, and strategic expansion.

Wealth Management Stocks Hit by AI Disruption Concerns

Not all stocks benefited from positive sentiment. Britain’s largest wealth manager, St James’s Place, suffered a sharp 14% decline after US-based platform Altruist launched a tool designed to help financial advisers personalise client investment strategies.

The announcement sparked fears that advanced AI-driven platforms could undermine traditional wealth management models. AJ Bell also came under pressure, with shares falling 8% amid concerns over technological disruption.

Although St James’s Place later recovered some ground, the episode highlighted growing investor anxiety around artificial intelligence reshaping financial services and threatening established business models.

Conclusion

The FTSE 100’s advance reflects a delicate balance between corporate optimism and economic caution. While takeover activity and strong earnings updates supported market gains, weak GDP growth, political instability, and emerging technological risks continue to cloud the outlook. As investors digest mixed economic signals, attention will remain focused on fiscal policy developments, interest rate expectations, and the resilience of corporate earnings throughout 2026.

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