Is low domestic buying of UK stocks a problem?

Goldman Sachs warns U.K. equities trade at a deep valuation discount — roughly 40% to the U.S. on a sector-neutral basis and 15–20% vs European peers — driven by long-term domestic “de-equitization” that has left local pension and insurance funds with only ~4% exposure. That lack of domestic demand has kept valuations depressed, but corporate buybacks (record in 2025) and a pickup in inbound M&A are providing a price floor and making U.K. stocks attractive to foreign buyers. The FTSE 100’s ~4% dividend yield (vs ~1.5% for the S&P 500) frames the market as a yield play with takeover upside; Goldman’s note implies a cautiously bullish case for patient, income-seeking or acquisitive capital, while a quick re-rating remains unlikely.