London, May 14, 2026, 18:01 BST
London’s main indexes finished in the green on Thursday. The FTSE 100 added 47.58 points, or 0.5%, landing at 10,372.93. The FTSE 250 climbed 299.70 points, or 1.3%, to reach 22,828.07. Stronger economic data managed to offset renewed political turbulence.
Why does this matter? The UK market was already juggling plenty: energy costs pushing higher, government bond yields under strain, chatter about more rate hikes, and now fresh questions swirling around Prime Minister Keir Starmer. When the growth figures hit, the FTSE 250—mid-caps more tied to the UK economy than the FTSE 100’s global giants—jumped harder, a clear sign traders were buying on relief.
Real gross domestic product climbed 0.6% in the first quarter, according to the Office for National Statistics, after a revised 0.2% uptick at the end of 2025. The UK’s services sector—by far the biggest slice of the economy—expanded 0.8%.
March figures did more than expected. GDP climbed 0.3% from the previous month, outpacing the 0.2% drop economists in a Reuters poll had predicted. Still, most analysts aren’t jumping to conclusions. Raj Badiani at S&P Global Market Intelligence pointed to possible stockpiling, tied to the Iran war, as a force pulling demand forward. And ING’s James Smith shrugged off the impact, saying the data “won’t change much” for the Bank of England, which remains focused on inflation. Reuters
Rates stayed front and center. Bank of England Chief Economist Huw Pill argued that a “prompt but modest” rate hike might be needed to prevent an energy-driven inflation spike from working its way into prices and wages. Policymakers refer to those follow-on price and wage changes as second-round effects. Reuters
Economists in a Reuters poll mostly stuck with forecasts for the BoE holding Bank Rate at 3.75% this year. Even so, over a third now see at least one hike ahead. Elizabeth Martins at HSBC just changed her forecast to two quarter-point rises. Financial markets, for their part, have already moved to price in a pair of increases.
Prediction markets reflected the division. On Polymarket, odds for a Bank of England rate hike in 2026 hovered around 58%. Over at Kalshi, the June BoE market pegged “maintain current rate” at 61%, pointing to traders hedging for restraint right now, but not ruling out action later. Polymarket
Politics kept weighing on sentiment, though stocks edged higher. Health minister Wes Streeting stepped down, citing his lack of confidence in Starmer’s leadership—a move that stoked speculation of a possible Labour leadership contest. Sterling slipped 0.1% to about $1.351 and 10-year gilts hovered near 5.02%. “One step closer” to a leadership challenge, said Nick Rees at Monex Europe. Philip Shaw at Investec called it “a lot of questions” for markets. Reuters
On Polymarket, Andy Burnham’s chances of being the UK’s next prime minister in 2026 hover near 47%. The market puts “No Next PM in 2026” at 26%, with Angela Rayner trailing at 8% and Wes Streeting close behind at 7%. Not exactly heavyweight odds by the standards of big-ticket financial assets, but it’s a clear signal that political risk is now firmly on the market’s radar. Polymarket
Legal & General shot to the top of the blue-chip leaderboard, buoyed by a Financial Times report flagging potential buyer interest in the insurer and asset manager. CEO Antonio Simoes told Reuters the group isn’t mulling a sale, according to the newswire, and a spokesperson for the company wouldn’t comment on the FT’s account.
3i Group dropped after Action, its key discount retailer, posted a slowdown in sales growth. According to the Financial Times, like-for-like sales at Action climbed just 2.4% in the 19 weeks to May 10, compared with 6.8% for the same stretch last year. That was enough to send 3i’s shares lower, as investors started to question just how much of the company’s value still hinges on a single retail asset.
London trailed behind a stronger session on the continent, with the DAX climbing roughly 1.3% and the CAC 40 tacking on 0.9%. By contrast, the FTSE 100 struggled to keep pace, its advance limited by softer performances among several big names and headwinds from ex-dividend trades.
Thursday’s rally might come down to relief, not real conviction. First-quarter growth could just be stockpiling or seasonal oddities showing up in the data. If energy keeps pushing inflation higher, the BoE might end up tightening policy even as the economy loses steam. Toss in a protracted Labour fight and gilt yields that haven’t really come down, and it’s easy to see appetite for UK stocks fading fast.
