Updated 10 December 2025 — With UK inflation easing, interest rates likely past their peak, and a wave of share buybacks supporting valuations, the London market is finally starting to look interesting again for long‑term investors. The FTSE 100 inched higher yesterday as defence names like BAE Systems and Rolls‑Royce offset weakness in British American Tobacco, while investors positioned for potential rate cuts from both the Federal Reserve and the Bank of England in 2026. [1]
At the same time, the Bank of England expects Chancellor Rachel Reeves’ first budget to shave roughly 0.4–0.5 percentage points off inflation from mid‑2026, mainly via energy‑bill support, on top of the decline already seen from 2022’s 11%+ peak to 3.6% in October 2025. [2] Its latest Financial Stability Report also suggests UK banks remain resilient even under severe stress scenarios. [3]
Put together, that backdrop of disinflation + a still‑solid banking system + heavy buybacks (FTSE 100 companies are on course to repurchase about £56.6bn of stock this year) is creating a fertile hunting ground for investors looking for the best UK stocks to buy now. [4]
Below you’ll find eight FTSE‑listed names that stand out today based on recent news, forecasts and analysis as of 10 December 2025. This is not personal financial advice – think of it as a researched watchlist to investigate further.
How we picked these “best UK stocks to buy now”
For this list we focused on companies that, as of early December 2025, show at least some combination of:
- Robust recent results – revenue and profit growth, or evidence of resilience through the rate‑hike cycle
- Clear catalysts – fresh contracts, pipeline milestones, restructurings or regulatory decisions announced in late 2025
- Reasonable valuations – based on recent analyst commentary and market multiples, not just historical glamour
- Balance‑sheet strength – especially important with rates still elevated
- Decent dividend or buyback support, where applicable
We also tried to diversify across sectors: healthcare, defence, energy, utilities, consumer staples, banking and data/analytics, plus one more contrarian recovery play.
Again: none of these is guaranteed to outperform. Prices, ratings and forecasts can change quickly.
1. AstraZeneca (LSE: AZN) – Healthcare heavyweight with pipeline momentum
Why it’s on the list now
AstraZeneca remains one of the UK’s flagship growth companies – and 2025 has reinforced that status. In its 9M and Q3 2025 results, the group reported 11% year‑to‑date revenue growth, driven by double‑digit expansion across all therapy areas, including 16% growth in Oncology. [5]
Recent news flow has been particularly supportive:
- On 9 December 2025, AstraZeneca announced that the first patient has been dosed in the randomized phase of the DESTINY‑Ovarian01 Phase 3 trial, testing ENHERTU plus bevacizumab as first‑line maintenance in HER2‑expressing advanced ovarian cancer – an important potential new use for one of its key oncology assets. [6]
- Earlier this month the US FDA accepted Baxdrostat for priority review in hard‑to‑control hypertension, another late‑stage pipeline asset. [7]
Share‑price performance has been strong: one recent valuation piece noted a ~28% year‑to‑date gain and nearly 30% over 12 months, leaving the stock trading on a premium multiple (around 30x earnings) but with growth to match. [8]
Investment case in December 2025
- Structural growth in oncology, rare disease and cardiovascular drugs provides a long runway, relatively independent of the UK macro cycle.
- The late‑stage pipeline is busy, with multiple catalysts in 2026–27 (including ENHERTU expansion and Baxdrostat).
- Defensive, low‑beta characteristics can help dampen volatility if UK or global growth disappoints. [9]
Key risks
- The valuation already prices in a lot of success; any clinical setback could hit the shares hard.
- Drug‑pricing pressure in the US and Europe remains a long‑term overhang.
- Currency moves (stronger sterling vs the dollar) can weigh on reported numbers.
2. BAE Systems (LSE: BA.) – Defence champion after a healthy pullback
What’s happening now
2025 has been another big year for defence stocks globally, and BAE Systems has been a prime beneficiary. One recent analysis puts the shares up about 49% year‑to‑date, even after a pullback since October. [10]
Several fresh catalysts have landed in the last few days:
- Yesterday BAE secured a $36m production contract from Lockheed Martin to supply Multifunction Modular Mast systems for US Navy submarines. [11]
- The company was also recently awarded a separate $123m contract to modernise the guided‑missile destroyer USS Forrest Sherman, with options lifting the potential value to $139m. [12]
- A November market update confirmed strong operational and financial performance and full‑year guidance in line with previous upgrades. [13]
Despite those wins, sentiment has cooled slightly in December: one UK business paper notes the shares are down around 16–20% from their record high in early October, as markets tentatively price in the possibility of a Ukraine‑Russia peace deal. Yet the same coverage highlights NATO members moving from struggling to hit 2% of GDP spend in 2022 to potentially targeting 5% over the next decade, underpinning BAE’s order book. [14]
A separate valuation study using discounted cash flow suggests the stock still trades roughly 20% below fair value, despite a current P/E around 26x. [15]
Investment case in December 2025
- Secular tailwind from higher defence spending in Europe, the US and Asia.
- Robust balance sheet and cash generation, supporting dividends and a £1.5bn share‑buyback programme. [16]
- Recent share‑price pullback offers a slightly better entry point than earlier in the autumn.
Key risks
- A faster‑than‑expected peace settlement or sharp defence‑spending cuts could compress the valuation.
- Political scrutiny of arms exports is an ever‑present headline risk.
- High expectations: any slip in order intake or margins could be punished.
3. Shell (LSE: SHEL) – Cash‑rich energy major with deal optionality
Fresh news and forecasts
Shell has spent 2025 returning mountains of cash to shareholders while quietly reshaping its portfolio. This week, Reuters reported that Shell is in advanced talks to acquire US Gulf of Mexico producer LLOG Exploration in a deal exceeding $3bn, which would significantly expand its deep‑water position if completed. [17]
On the analyst side:
- MarketBeat data shows a “Moderate Buy” consensus from 22 analysts over the past year. [18]
- A recent note from JPMorgan Cazenove reiterated an “Overweight” rating on Shell’s London‑listed shares, with an implied upside of roughly 21.5% based on their published price target. [19]
- Another forecast compilation points to a bullish median price target implying low‑double‑digit upside, backed by a balance of Buy and Hold ratings and no Sells. [20]
Investment case in December 2025
- Enormous free cash flow at current oil and gas prices, supporting dividends and ongoing buybacks.
- Potential LLOG deal could add long‑life, high‑margin barrels in one of Shell’s core upstream regions. [21]
- Integrated LNG and marketing businesses offer some diversification away from pure crude.
Key risks
- Shell’s fortunes are still tied to volatile commodity prices.
- Any large acquisition brings execution risk and potential political scrutiny.
- Environmental and regulatory pressures could raise costs or limit future projects.
4. National Grid (LSE: NG.) – At the centre of the UK’s power “superhighways”
What’s new
If you’re looking for a blend of income and infrastructure growth, National Grid has been quietly delivering. Over the past year, one analysis notes the shares are up about 24%, with more than 80% total return over five years, helped by stable, regulated earnings. [22]
Two big developments stand out:
- Ofgem’s grid push: On 9 December, the UK energy regulator approved early investment in three major electricity “superhighways”, including subsea Eastern Green Link cables and a new line from Grimsby to Walpole. These projects will help move surplus wind power from Scotland/the North Sea to the south of England, cutting costly constraints and curtailment payments to wind farms (currently nearly £2bn a year) and potentially saving consumers £3–6bn over time. [23]
- Regulatory clarity: In late November, Ofgem published its RIIO‑T3 final determination, setting allowed returns and investment parameters for transmission operators like National Grid for the next regulatory period, while the company also completed the sale of its Grain LNG terminal and confirmed a scrip dividend for the 2025/26 interim payout. [24]
A recent investor article highlights that National Grid is in the middle of a £60bn five‑year investment plan, with the share price up around 19% in 2025 as markets reward its role in the energy transition. [25]
Investment case in December 2025
- Defensive, regulated earnings with inflation‑linked characteristics.
- Huge capex pipeline backed by regulators, aligned with UK and EU decarbonisation goals. [26]
- Attractive dividend profile (plus scrip option), appealing to income investors. [27]
Key risks
- High capex means elevated debt levels; higher‑for‑longer rates could pressure valuations.
- Political and public pushback around energy bills could influence regulatory decisions.
- Large projects carry execution and cost‑overrun risk.
5. Unilever (LSE: ULVR) – A leaner consumer giant after the Magnum spin‑off
Huge restructuring milestone this week
Unilever has just completed one of the most consequential portfolio reshuffles in its history:
- Its ice cream division has been spun off as The Magnum Ice Cream Company, now listed separately. [28]
- Following that demerger, Unilever implemented an 8‑for‑9 share consolidation, which took effect this week and sent the stock up around 12–13% in a single session, with trading volumes more than eight times normal levels. [29]
At an investor event hosted by JPMorgan, CEO Fernando Fernandez said Unilever will allocate roughly €1.5bn (US$1.7bn) per year to M&A, with a strong focus on the US market, and expects its operating margin to rise to at least 19.5% post‑ice cream, versus 18.5% previously. [30]
Valuation work from independent analysts suggests the stock now screens modestly undervalued on some metrics, with scope for further rerating if the new, more focused Unilever executes well. [31]
Investment case in December 2025
- A simpler, higher‑margin portfolio (home care, beauty, personal care and nutrition) should allow sharper capital allocation. [32]
- Ongoing cost‑cutting and brand investment could lift organic growth back into the mid‑single‑digits.
- Strong free cash flow and a long dividend history offer support if markets turn choppy.
Key risks
- Integration of future acquisitions (given the €1.5bn annual M&A budget) could be messy.
- Consumer staples face private‑label competition if the economy slows.
- Any stumble after the highly visible Magnum/ice cream demerger could dent investor confidence.
6. HSBC Holdings (LSE: HSBA) – Global bank on a single‑digit P/E
Where things stand
Higher interest rates have been a double‑edged sword for banks. For HSBC, they’ve bolstered net interest income but introduced credit and market risks. Even so:
- In a recent shareholder piece, analysts highlighted that HSBC trades on a 2025 P/E of about 9.9x and 2026 P/E of ~9.3x, both below the “value” benchmark of 10x, and argued the share price could rise about 14% towards £12.44 if the investment case plays out. [33]
- A 12‑month consensus price target of around 1,060p suggests the stock is roughly fairly valued at current levels, with upside mainly dependent on execution and capital returns. [34]
- HSBC’s own 2025 interim report emphasised that while rates are expected to fall gradually in 2025‑26, they should remain structurally higher than pre‑pandemic levels, which is generally supportive for bank margins. [35]
From a systemic perspective, the Bank of England’s 2025 stress tests concluded that UK banks can maintain lending even under severe economic shocks, which reduces tail‑risk worries for investors in the likes of HSBC. [36]
Investment case in December 2025
- Global diversification across Asia, the UK, Europe and the Americas.
- A still‑elevated rate environment supports net interest income, even as cuts begin. [37]
- Attractive dividend yield and buybacks (though temporarily constrained by the Hang Seng acquisition, according to recent buyback statistics). [38]
Key risks
- Slower‑than‑expected growth in China or further property‑sector stress could weigh on earnings.
- Regulatory and political scrutiny remains intense, especially around capital returns and cross‑border operations.
- The share price already reflects expectations of relatively benign credit losses.
7. RELX (LSE: REL) – High‑margin data & analytics compounder
Solid growth story in 2025
RELX doesn’t get the headlines of mega‑caps like Shell or HSBC, but it has quietly become one of the FTSE’s highest‑quality growth names.
- For the first half of 2025, RELX reported 7% underlying revenue growth and 9% underlying growth in adjusted operating profit, with margins rising to 34.8% thanks to a continued mix shift towards higher‑value analytics and tools. [39]
- An October trading update confirmed underlying revenue growth of around 5% year‑to‑date, with momentum driven by subscription‑based digital products and data‑led solutions across its Legal, Risk, and Scientific segments. [40]
- In late October, RELX reaffirmed its full‑year 2025 outlook, signalling confidence in both growth and margin expansion. [41]
Investment case in December 2025
- Recurring revenue model with strong pricing power and low churn.
- Structural tailwinds as customers (law firms, corporates, governments, scientists) demand more data and decision tools.
- Long track record of steady dividend growth and buybacks, supported by high returns on capital. [42]
Key risks
- Valuation is not cheap; any slowdown in growth could lead to multiple compression.
- Currency and macro pressures in key markets (notably the US and Europe) could affect reported results.
- Ongoing investment in AI‑powered tools must keep pace with competition.
8. Diageo (LSE: DGE) – Quality brands with turnaround potential (high risk, higher reward)
Why it’s controversial – and interesting
Diageo, owner of global spirits brands like Johnnie Walker and Guinness, has had a brutal couple of years:
- One recent analysis notes the share price is down around 57% from its highs, with about 34% of that decline occurring in 2025 alone, leaving the stock trading at levels last seen years ago. [43]
- The biggest headache is its US spirits business, where volume declines of about 3.5% are forecast amid margin pressure and intense competition, particularly in tequila. A recent research note cut its rating to “Neutral” from “Buy” on these concerns and on valuation. [44]
But there are emerging reasons contrarians are paying attention:
- Former Tesco boss Dave “Drastic Dave” Lewis is set to take over as CEO, with commentators arguing that his reputation for cost‑cutting and portfolio rationalisation could help stabilise Diageo’s US operations and refocus investment on the strongest global brands. [45]
- Despite the slump, Diageo still owns some of the most valuable spirits brands in the world, and premiumisation trends outside the US remain supportive. [46]
Investment case in December 2025
- Genuine turnaround potential if the new CEO can fix the US business and sharpen capital allocation.
- Depressed share price could offer upside leverage if margins recover even modestly.
- Defensive characteristics in many markets, where spirits demand is relatively stable across cycles.
Key risks
- If US trends don’t improve, Diageo could remain a value trap despite its brand power.
- Further downgrades from analysts are possible if 2026 guidance disappoints. [47]
- Execution risk is high: big restructurings often take longer and cost more than planned.
Honorable mention: B&M European Value Retail (LSE: BME) – Deep value in discount retail
For investors with a stronger stomach for volatility, B&M deserves at least a spot on the watchlist:
- The shares have collapsed by around 30%+ in 2025 and now sit over 55% below their 52‑week highs, with a P/E in the mid‑single digits and a headline dividend yield that has hovered around 8–9% according to recent analyses. [48]
- Interim FY26 results showed 4% group revenue growth but a 30% drop in EBITDA margins as the new CEO’s turnaround plan ramps up spending and grapples with weaker like‑for‑like sales. [49]
- Earlier in the autumn, some brokers saw up to 50% upside from the depressed share price – but more recent US‑listed ADR commentary actually implies downside from here, highlighting how split opinion has become. [50]
This is very much a high‑risk, high‑reward idea: if the turnaround delivers, today’s price could look cheap; if not, the balance sheet and leverage could become a problem.
Big picture: what could move UK stocks in 2026?
Before buying any of the names above, it’s worth keeping the macro and policy backdrop firmly in mind:
- Inflation & rates: UK inflation has already fallen sharply, and the Bank of England expects the latest budget to reduce it further from mid‑2026. Markets are pricing additional rate cuts from the current 4% base rate, possibly starting in 2026 – but a resurgence in wage or services inflation could delay those cuts and hit rate‑sensitive sectors like banks and real estate. [51]
- Energy transition: Ofgem’s green‑light for early investment in grid “superhighways” underscores the scale of capex coming in utilities and renewables – a tailwind for National Grid, but also a source of political debate over bills. [52]
- Defence spending: Headlines about potential peace talks can trigger short‑term wobbles in stocks like BAE Systems, but NATO’s long‑term commitments point to elevated defence budgets for years. [53]
- Corporate actions & buybacks: With £56.6bn of 2025 buybacks across the FTSE 100 and more already flagged for 2026, capital return is a major theme – but heavy buybacks can sometimes mask weak underlying growth. [54]
How to use this list (and a quick disclaimer)
Think of these eight UK stocks not as a “must‑buy now” list, but as high‑quality starting points for your own research:
- Match to your goals – Income‑seekers may gravitate more to National Grid, Shell, HSBC or Unilever; growth‑oriented investors might prefer AstraZeneca or RELX; contrarians might study Diageo or B&M.
- Check valuations in real time – Prices move daily; always compare current P/E, dividend yield and analyst targets with the numbers cited here.
- Diversify – Spreading across sectors (and ideally geographies) is almost always safer than concentrating in a single theme.
- Know your risk tolerance – Defence and energy bring geopolitical risk; banks are cyclical; turnarounds like Diageo or B&M are inherently uncertain.
References
1. www.reuters.com, 2. www.theguardian.com, 3. www.bankofengland.co.uk, 4. www.fnlondon.com, 5. www.otcmarkets.com, 6. www.stocktitan.net, 7. www.astrazeneca.com, 8. finance.yahoo.com, 9. www.marketbeat.com, 10. www.fool.co.uk, 11. www.edrmagazine.eu, 12. www.asdnews.com, 13. www.baesystems.com, 14. www.thetimes.com, 15. simplywall.st, 16. www.thetimes.com, 17. www.reuters.com, 18. www.marketbeat.com, 19. fintel.io, 20. tickernerd.com, 21. www.reuters.com, 22. finance.yahoo.com, 23. www.theguardian.com, 24. www.stockopedia.com, 25. www.fool.co.uk, 26. www.theguardian.com, 27. www.stockopedia.com, 28. www.thetimes.com, 29. www.proactiveinvestors.com, 30. www.reuters.com, 31. finance.yahoo.com, 32. www.reuters.com, 33. www.fool.co.uk, 34. www.marketbeat.com, 35. www.hsbc.com, 36. www.bankofengland.co.uk, 37. www.hsbc.com, 38. www.fnlondon.com, 39. www.relx.com, 40. www.relx.com, 41. www.investing.com, 42. www.relx.com, 43. uk.finance.yahoo.com, 44. www.ainvest.com, 45. www.fool.co.uk, 46. www.ainvest.com, 47. www.ainvest.com, 48. uk.finance.yahoo.com, 49. www.investegate.co.uk, 50. uk.finance.yahoo.com, 51. www.theguardian.com, 52. www.theguardian.com, 53. www.reuters.com, 54. www.fnlondon.com
