London stocks slipped back on the final trading day of 2025, but the FTSE 100 index still enjoyed its strongest annual gain since 2009.
The top flight index closed 9.33 points, or 0.09%, lower at 9,931.38, but has risen 21.5% over the year. It was its best year since recovering from the financial crisis in 2009.
Its annual gain is more than twice what it achieved in 2024 and ahead of the 17.2% from the S&P 500 index in the US.
The surge comes against headwinds such as the continuing war between Russia and Ukraine and President Trump’s tariffs in the spring.
At a time when technology is all the rage, it has been “old economy” stocks such as miners, banks and defence companies that have propelled the index this year.
Shares in Babcock International, the defence company, have surged by 148% and engineering group Rolls-Royce has more than doubled, while Fresnillo, Endeavour Mining, Lloyds Bank, Barclays and Standard Chartered have also been among the biggest risers.
Investors looking for income growth have turned to the stock market for better returns as interest rates have fallen.
A third of blue-chip companies offer a higher yield than the current central bank interest rate. Dividend yields of around 8% at Legal & General Group and Phoenix Group Holdings continue to highlight the income appeal of the FTSE 100 index.
Retirement and savings business Phoenix yields dividend income of 7.6%, having increased its half-year payment in October by 2.6% to 27.35p a share. The Standard Life brand owner’s strong level of cash generation means the dividend is well covered, with £300 million a year of excess capital a source of financial flexibility.
In today’s shortened trading session, Harbour Energy said it has been appointed operator of the Zama oil project offshore Mexico after an agreement between the project’s partners.
Dan Coatsworth, head of markets at AJ Bell, said: “This year’s success for the blue-chip index is not a flash in the pan.
“The FTSE 100 has delivered positive returns in eight of the past 10 years, averaging 9.1% annually over that period including dividends.
“This kind of performance reinforces the attraction of investing over the long term. There may be years when performance disappoints, but history suggests it’s worth pursuing.”
The rise in London stocks has been against a flurry of companies switching their focus to Wall Street, though there have been signs of a recovery, supported by rule changes on listings.
Companies including Royal Mail’s owner International Distribution Services (IDS) and Hargreaves Lansdown were among those to be taken private, with Scotland’s Wood Group due to follow when its acquisition by Sidara is completed.
It was also a stronger year for IPO activity with 11 listings on the LSE, raising total proceeds of £1.9 billion – the most since 2021, according to analysis by PwC. However, there were no listings by Scottish companies with none expected in the coming months.
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