FTSE 250 – Index Zinger? 

The FTSE 100 hogs the headlines, but it's the FTSE 250 where the Government's Growth Agenda will be best served. 

Welcome to Mergerspresso, AG’s corporate finance soundbite - all you need to know about the public markets in the time it takes to make your coffee. I'm Simon Wood. 

It’s a familiar navel-gazing refrain about the UK’s largest plcs - old economy, sluggish growth, depressed valuations. But we’re looking in the wrong place. Turns out it's the FTSE 250 that holds the master key to the Chancellor's push for growth.

Research by the CBI shows that earnings growth rates of the FTSE 250 outperform - just – their listed peers in the US and Europe. That's the only segment of the market where this is the case. 

The bulk of that growth over the last decade has been generated from international markets – mostly outside Europe, with the domestic scene being sluggish.

Within the FTSE 250, businesses are almost all exclusively focussed either domestically or internationally. Very few have a blend, resulting in a starkly U-shaped market.

That gap shows where private equity backed takeovers have taken a bite out of the 250 index – lasering in on the the undervaluation of such companies' prospects. But it also indicates the sweet spot where public market reform and Labour’s growth agenda should be focussed - enabling domestic UK companies in and around the 250 to become international champions - and so benefit from the highest growth rates by market and geography alike. 

The London market is perfectly placed to support these transformations - and if after that, such companies have the scale to go truly-global and legitimately seek a US listing, there should be no handwringing. The markets will be in perfect working order.

Join us next time on Mergerspresso where we’ll look at pension reform and the public markets.