UK growth: opportunities amid tariff turbulence

As with all investments, your capital is at risk.

Recording a podcast about UK growth companies shortly after President Trump’s ‘liberation day’ tariff announcement is a reminder of how events can reshape conversations. But for Baillie Gifford’s head of UK Equities, Iain McCombie, the task at hand is unchanged: investing in businesses with long-term growth potential.

“What’s now important is how company management teams adjust to the uncertainty,” says McCombie, who also jointly manages the Baillie Gifford UK Growth Trust alongside Milena Mileva.

“Good leaders adapt to changing circumstances. And that’s where we spend a lot of our time: trying to understand companies, their long-term thinking and how adaptable they are.”

The latest Short Briefings on Long Term Thinking podcast explores how the UK government’s growth plans relate to McCombie’s portfolio companies. The prime minister, Sir Keir Starmer, has pledged to “slash red tape”, “kickstart growth” and “encourage long-term investment”, adding that the US tariffs “don’t so much change as turbocharge” the initiative.

“One of the big problems that I’ve heard companies talk about is the growing burden of bureaucracy,” says McCombie. “So anything that’s looking to reverse that would be good news. My caveat is that all this is hard to do.”

The government’s Invest 2035 strategy prioritises a handful of “growth-driving sectors” that overlap with many of the companies McCombie and his colleagues back.

They include Renishaw, a leading advanced manufacturer. It specialises in making probes, sensors and other products that enable precise measurements and high degrees of control. Applications range from manufacturing semiconductors and aeroplane engine blades to operating robots and other automated systems.

“In engineering, if about 5% of your capital expenditure is on research and development, that’s pretty good. This company is spending almost triple that amount to be at the cutting edge,” McCombie observes.

In the creative industries, Baillie Gifford is Games Workshop’s biggest institutional investor. Games Workshop sells its fantasy war game miniatures through its network of 500-plus stores worldwide, as well as through other retailers. After lengthy negotiations, it recently licensed to Amazon the rights to turn its Warhammer universe into films and a TV series.

“Games Workshop has very rich intellectual property that it’s built up over 30 years and is very protective of it,” McCombie says. “It’s trying to think genuinely long term and wants to make sure that the production levels and storylines will stay true to its high standards.”

‘Digital and technologies’ is a third growth-driving sector that McCombie has positions in. Holdings include Wayve, a driverless-car software developer. Rather than creating a complex system of human-coded rules or curating an expensive library of labelled data, as others have tried, Wayve is training ‘general purpose’ models to use realworld driving footage and hyper-detailed simulations to perceive, reason and plan. Nissan plans to install Wayve’s technology in its cars from 2027.

McCombie also highlights the role of one of his biggest holdings, Auto Trader, in this digital field. “It’s 11 times bigger than the number two player and 14 times bigger than the number three: that’s dominance,” he says, adding that Auto Trader is pursuing further growth by extending into related services, such as helping shoppers secure finance for car purchases, for which it charges a commission.

Other topics covered include investments in financial-services companies, such as the consumer-debt data specialist Experian, and how the government’s housebuilding ambitions could benefit ventilation equipment maker Volution Group.

McCombie concludes with an expansive perspective on these changing times. “History teaches you to be an optimist,” he says. “Backing the human spirit, backing human ingenuity – that’s what buying equities is all about. And in the long run, you’re right to do that.”

Listen to the podcast here.

Important information

This article does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA. A Key Information Document is available at bailliegifford.com.

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