Does the FTSE 100 breaking the 10,000 barrier mean a more prosperous 2026?

Savers who have already heeded Rachel Reeves’s call and moved their underperforming ISAs into stocks will have applauded this week when the blue-chip index broke through the 10,000 barrier for the first time. Could this early rally be equally good news for Britain’s wider economy? asks James Moore

If Rachel Reeves made a New Year’s resolution that she simply cannot afford to break, it is to get more savers “backing Britain”.

To see some actual growth in this country, individuals and institutions will have to be encouraged – or somehow dragged away from their tax-free ISAs – to put their money into the stock market, where the rewards are greater, but so too are the risks.

It’s sensible advice – and timely, too: National Savings and Investments, where millions keep their savings, has just announced cuts to the already pitiful interest rates on eight of its accounts.

Just as the stopped clock tells the right time twice a day, the chancellor is on to something. And, bang on cue, the FTSE 100 has surged to an all-time high, ending the first Monday of the new year above the psychologically important ceiling of 10,000 for the first time.

The good news has delivered a very happy new year for some – notably, those small-time savers whose investments are index-linked to it. I count myself among those who now may be in for a modest windfall.

Will this early stock-market rally be equally good for Britain’s wider economy? Well, let’s take a look.

The FTSE 100 is not a great barometer for the UK economy as a whole. Britain’s leading index is weighted by market value, and is thus dominated by large international companies, some of which boast little more than an office or two here. They also mostly report their earnings in dollars, the world’s reserve currency.

The top five are the drug giant AstraZeneca, whose biggest business is across the Atlantic; HSBC, which makes most of its money in Asia; Shell, which sells its oil to all-comers; Unilever, which is everywhere; and, still flying the flag, Rolls-Royce: it is also an international manufacturer, but it keeps several aerospace sites around the UK.

Far more UK-dependent are the constituents of the second-tier FTSE 250. It delivered a return of nearly 10 per cent over the last 12 months, which is nice enough, but well short of the more than 22 per cent its bigger brother served up to investors. But the FTSE’s performance still matters a lot to the City, which pays a lot of tax and employs a lot of well-paid people who pay a lot of tax.

Despite the index heading rapidly northwards with a pack of fresh huskies pulling the sled, the London Stock Exchange has lately struggled to attract new companies, while some of its existing big names have taken flight to New York.

These include gambling giant Flutter (which owns Betfair, Paddy Power etc), tool-hire provider Ashtead, and plumber Ferguson. AstraZeneca, the market’s top gun, has openly mused about slinging its hook, too; Fintech Wise has received shareholder approval to do the same. Unilever floated its ice-cream business in Amsterdam, rather than staying home.

Reeves would like to improve London’s prospects by boosting the amount we ordinary Joes invest are savings in stocks and shares, and establishing more of an “equity culture”, like the one in the US.

The problem with this government is that while it has more bad ideas than The Cat in the Hat, it’s too timid to push through its good ones with any conviction.

Exhibit A is Reeves’s plan, unveiled in the November Budget, to cap the cash ISA at £12,000, while maintaining the existing £20,000 tax-free savings allowance. Now, if you want to use the full amount, you will have to tap into the markets.

However, what the chancellor should have done is to simply scrap what is objectively a dreadful product from the perspective of savers who end up giving their money to banks, whose cash ISAs pay them a miserable rate that (mostly) fail to keep up with inflation.

Exhibit B is Reeves offering a stamp-duty holiday on trading in the shares of companies that float their shares in London, when she should have scrapped a destructive levy that has long been holding back the City. She’d get the revenue back through higher receipts in other areas.

Perhaps the FTSE breaking the 10,000 barrier will persuade a few more people of the benefits of savings via stocks and shares ISAs? There will be an awful lot of winners if it does. Increasing people’s prosperity is, needless to say, good for the economy.

Perhaps it may also persuade a few more companies to list in London. The grass isn’t always greener on Wall Street, which has plenty of vexatious and onerous regulations and where companies can struggle to stand out from the crowd. If Reeves shows a bit of gumption in expanding measures designed to encourage investment in shares, so much the better.

Happily, the end of last year saw a flurry of potential listings being announced, with £1.6bn raised in 2025, making it London’s best year since the record-breaking 2021, when the number was £16.8bn.

PWC, the professional services firm, thinks the momentum will continue through the current year. The market’s strong performance will help with that, perking up the City, delivering more revenues to its denizens and to the chancellor.

Whichever way you look at it, the FTSE perking up is an unequivocal win. Bursting through the 10,000 barrier and then keeping that momentum going could deliver real benefits to the City and also UK plc. As well as to those of us who have money invested in it.