A decade after Brexit, is the UK finally due its bounce?

By Joss Murphy on 23 June 2026 in UK

Ten years ago the UK voted to leave the European Union. The economic and market implications were immediate: sterling fell sharply, investor confidence weakened and uncertainty around trade, regulation and economic growth took hold.

A decade later, Brexit’s impact remains deeply embedded in the UK story. Research from the National Bureau of Economic Research estimates the UK economy is now 6% to 8% smaller than it would have been had the country remained in the European Union*, highlighting the scale of the structural headwinds facing businesses. But while the post-Brexit years have largely been defined by outflows, weak sentiment and relative underperformance, FundCalibre believes a compelling investment case for UK equities, particularly smaller companies, is beginning to emerge.

Performance data illustrates the divergence clearly. Since the Brexit vote, the global equity rally has left the UK behind. The MSCI World index has returned 270%, while the IA Global sector has delivered 199%. By comparison, the FTSE 100 returned 142%, the IA UK All Companies sector 91% and the IA UK Smaller Companies sector just 75%**.

Headline performance only tells part of the story. Brexit undoubtedly accelerated a loss of confidence in UK assets, but it didn’t break the market. In fact, the resilience of many UK-listed businesses through Brexit, Covid, inflation shocks, political turmoil and rising rates has been remarkable.

The true legacy of Brexit: valuation

The most obvious opportunity has been price. Persistent outflows and weak sentiment have left UK equities trading at a material discount to global peers, particularly outside the mega-caps, despite broadly resilient fundamentals. The result is a market that is under-owned, undervalued and, in our view, overlooked.

UK equities continue to trade at roughly a 30–35% discount to US equities on a price-to-earnings basis***, with the deepest discounts found lower down the market capitalisation spectrum. For many active managers, this valuation gap has become increasingly difficult to ignore.

Nowhere is this more evident than in UK smaller companies, which have borne the brunt of the post-Brexit discomfort, hit by domestic pessimism, higher interest rates and investors’ preference for US large-caps. But many fund managers argue this disconnect between valuations and fundamentals has become extreme.

The team at Liontrust believes the current setup in UK micro caps may be one of the most attractive in years. Victoria Stevens, co-manager of Liontrust UK Micro Cap says:

She adds that valuation metrics across the portfolio, including price-to-earnings, free cash flow yield and dividend yield, are at extremes not seen since launch, creating both a margin of safety and substantial upside potential should valuations normalise.

The disconnect between valuation and business quality is also attracting external buyers. M&A activity has accelerated across the UK market, particularly among smaller companies, as overseas buyers and private equity firms take advantage of depressed valuations. Many of Britain’s best businesses are being acquired at prices active managers believe fail to reflect their long-term worth.

The irony is that while public market investors have shunned UK equities, overseas buyers have been aggressively purchasing them.

Global leaders in share buybacks

At the same time, UK companies are increasingly returning capital to shareholders. Data from Schroders shows the UK has become the global leader in share buybacks, overtaking the US in 2024. Nearly 60% of large UK-listed companies repurchased at least 1% of their shares in the past year, reflecting strong cash generation and the attractiveness of buying back undervalued stock****.

Georgina Brittain, co-manager of the JPMorgan UK Small Cap Growth and Income Trust, says:

That opportunity is increasingly visible at the company level, where many smaller businesses continue to deliver operationally, despite weak market sentiment. “Many portfolio holdings operate in specialist niches where competitive intensity is limited and long-term demand drivers remain intact,” says Simon Moon, manager of the Unicorn UK Smaller Companies fund. “In periods such as these, where macro uncertainty can dominate short-term share price movements, valuation anomalies often become more pronounced. That can create attractive opportunities for patient, active investors.”

The next decade

The key point is simple: the next decade for UK equities does not need to be spectacular to deliver strong returns. “he next 10 years don’t need to be amazing – they just need to be less bad. After a decade of pessimism, valuations already reflect a huge amount of bad news. If capital flows stabilise, if confidence improves, or if domestic demand returns, UK smaller companies could rerate meaningfully.

Brexit was supposed to unlock a new era for Britain, but the market bounce back is taking much longer than expected. However, this long delay may have created one of the most compelling opportunities in developed markets today.

*Source: NBER, The Economic Impact of Brexit, revised June 2026
**Source: FE Analytics, total returns in pounds sterling, 23 June 2016 to 17 June 2026
***Source: AIC, 9 June 2026
****Source: Schroders Equity Lens April 2026