Rising FTSE 100 gives Rachel Reeves a win, for now

Rachel Reeves Addresses The Mansion House Financial Services Dinner

(Image credit: Carl Court/Getty Images)

published 18 July 2025

When chancellor Rachel Reeves was seen with tears in her eyes in the House of Commons recently, it was probably because she had been contemplating the prospects for the economy over the next few months. She promised she would generate “growth, growth, growth”, but so far, there has been very little sign of it. Her Budget last autumn stopped the economy in its tracks. The non-doms fled. Companies put a freeze on hiring. It has been a dismal start to her time in office, and it’s not now clear how long she can survive.

Yet she can claim one achievement. The FTSE 100 hit an all-time high this week, briefly nudging through 9,000. It fell back soon afterwards, but it is still up significantly on the year so far. It could even punch through the psychologically significant 10,000 barrier later in the year. It may not be long before we see Reeves brandishing a chart of the index to show how well she is doing and claiming that global investors are backing her policies.

Still, the reality is that there is nothing to celebrate. The FTSE is only just starting to catch up with markets around the world after years of dismal underperformance. The index hit 6,930 all the way back in December 1999, meaning it has taken 25 years to add just another 2,000 points. For a comparison, Germany’s Dax index has tripled over the last 25 years. In the US, the S&P 500 has risen fourfold over the same time period; the tech-heavy Nasdaq more than six-fold. True, the CAC-40 in Paris has done almost as badly, but otherwise every other major index around the world has soared past the FTSE 100. Indeed, simply to have kept pace with its peers the index should be somewhere between 20,000 and 30,000 by now. In that context, 9,000 does not look like anything to get very excited about. The returns have still been miserable compared with what you might earn elsewhere.

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What success it has had won’t last. The FTSE 100 is a very international index, with companies from Shell to GSK to Diageo earning most of their profits from the rest of the world. But it is still basically tied to the British economy. And the outlook for growth in this country is grim, and getting worse all the time. Foreign investment has collapsed, retail sales are flat and very few new jobs are being created.

Worse, with the government desperate for extra money to spend, taxes are inevitably going to rise, and businesses will bear the brunt of that, just as they did last time around. We may well see higher business rates for big shops and warehouses, an extension of windfall taxes on the energy companies and the banks, and we may even see a “temporary” corporation tax surcharge, modelled on the levy that was charged in France last year. Whatever form it takes, it will mean lower profits and lower dividends to distribute to shareholders, and that will stop the index from climbing much higher.

Finally, companies are still leaving, with a wave of major businesses choosing to list their shares in New York instead of London. The likes of Flutter and Wise have already gone; even the largest company quoted on the FTSE, the pharmaceutical giant AstraZeneca, has discussed a move to the other side of the Atlantic. Meanwhile, fast-expanding new businesses, such as the fintech star Starling Bank, are looking towards Wall Street instead of the City, and global companies, such as the Chinese fast-fashion powerhouse Shein, are turning down the opportunity to list here. For an index to grow at a decent rate, it needs a steady stream of faster-growing new companies to join it, and to replace the older, more mature giants that don’t have much potential for expansion. The FTSE 100 has entirely lost the ability to attract those kinds of businesses, and that is going to make it very hard to keep up with its peers, especially in the US.

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.