London has been named the share buyback capital of the world, with nearly 60 per cent of UK large cap companies buying back their stock in bulk over the past year, according to new research from wealth manager Schroders. This compares to just 45 per cent in the United States, marking a significant shift in corporate strategy.
Why UK Companies Are Buying Back Shares
Listed companies often repurchase their shares to return excess cash to shareholders and boost financial metrics like earnings per share. The surge in UK buybacks is largely attributed to the London stock market's cheap valuations relative to global peers. The FTSE 100 is currently trading at 13.1 times forecast earnings for the next 12 months, a 37 per cent discount to the S&P 500's 20.8 times rating, according to AJ Bell.
Duncan Lamont, head of strategic research at Schroders, noted that since 2016, the UK stock market has become increasingly undervalued compared to overseas markets. This has prompted directors to buy back shares, sending a clear signal to the market that they see value in their own companies. Lamont hopes this will spur domestic investors to reconsider UK equities, which have been overlooked in favour of more glamorous US tech stocks.
Global Trends: Japan and Europe
Japan and Europe have also seen an uptick in share buybacks, but for different reasons. In Japan, the focus is on corporate governance reform. Following the appointment of Prime Minister Sanae Takaichi in October 2025, companies have begun returning capital to investors instead of hoarding cash. Lamont described this as a structural change that could benefit Japanese equities long-term.
Europe's rise in buybacks mirrors the UK's, with companies using repurchases as a signalling tool to indicate that shares are undervalued.
US Buyback Slowdown
In contrast, the US has pivoted away from share buybacks, particularly in the tech sector. Major companies like Meta and Apple are redirecting cash towards infrastructure investments, such as data centres, driven by the AI arms race. Lamont noted that while returning cash to shareholders is positive, reinvestment is crucial for growth, and a balance must be maintained.
Overall, the UK's leadership in share buybacks reflects a strategic move to capitalise on low valuations, with potential long-term benefits for the market.
