Nestled in the heart of the City by the iconic dome of St Paul’s Cathedral, the London Stock Exchange (LSE) remains one of the largest and most important financial markets anywhere in the world.
And, after a turbulent few years for the LSE following a myriad of economic challenges in the UK, most notably the fallout from Brexit and the calamitous mini budget unleashed by former PM Liz Truss, it recently reclaimed its crown as Europe’s most valuable with the total value of companies listed on the exchange reaching a staggering $3.18 trillion.
This upturn in fortunes for the LSE is being driven in part by the robust performance of several rapidly developing industries whose future-focused outlook is exciting to venture capitalists up and down the country. Several high-potential companies have emerged from these industries in recent years providing investors with a wealth of choice and opportunity. Here are the fastest-growing industries investors should be aware of when looking at the LSE.
Green Economy
In many parts of the world, the effects of global warming and climate change are now starting to be felt in real-time, with extreme weather events becoming more frequent and global average temperatures increasing year on year. The finance world has taken notice, with investments in the green economy booming. Huge sums of money are now being pumped into companies working on renewable energies, carbon capture and storage as well as sustainable technologies like electric vehicles and environmental infrastructure. 2023 saw the UK green economy grow by 9%, dwarfing the 0.1% growth of the overall British economy, highlighting that many on the exchange are shifting their focus to companies in the sector. Leading investors have identified the green economy as a long-term investment opportunity, with it expected that these stocks will remain a dominant force as societies continue to tackle one of the biggest issues of the age.
Financial Technology
The UK fintech industry has experienced rapid expansion over the last five years with a wealth of novel and innovative companies revolutionising the way in which we spend our money. The industry is expected to grow by 32% in terms of revenue across the next year, with new innovative companies joining established industry leaders such as Revolut, Wise and checkout.com. The positive impact of the growth of fintech is not just influencing the banking world, with the technology now being felt everywhere across the economic landscape, with many traditional sectors now transitioning onto online spaces. The gambling industry offers a perfect example of this. The market is experiencing an unprecedented shift with online casinos, with not just the online casinos themselves popping up but also a market to review them. This means we now see that a site like Casino.org ranks these new operators who are dominating the sector in terms of revenue and investment, showing it has also led to adjacent industries popping up in their wake. Investment in fintech is also driving innovation in areas such as healthcare and artificial intelligence with much of the technology being transferable to other industries.
Non-Alcoholic Beer and Wine
While it is true that London is home to some of the best pubs for a pint in the world, changing attitudes towards drinking alcohol have led to the emergence of an increasingly lucrative non-alcoholic beverage production industry. The health and wellness buzz over recent years has influenced trends such as dry January and Sober October while recent studies have also shown that Gen Z are responsible for a new generation who are drinking far less. While the resultant negative economic impact this has had on the alcohol industry is apparent, many companies within the sector have diversified, focusing on the development of non-alcoholic beer and wine. With approximately 25% revenue growth expected across the next year, the market is becoming increasingly competitive, with industry giants such as Heineken and Asahi UK battling it out with newcomers such as Big Drop Brewing and Impossibrew. This has led to a stable and healthy industry which shows no signs of slowing down.
Artificial Intelligence and Software Development
The emergence of publicly available large language models such as ChatGPT and Claude has already had a profound effect across the globe since being released last year. Workplaces, education centres and businesses alike have seen their operations dramatically affected by the automation of tasks possible using AI tools outlining incredible future possibilities. As a world-leading tech hub, it is no surprise that significant sums have already been invested into AI software development companies that are on the LSE. Investors can purchase stocks in behemoth companies like Nvidia, Microsoft and IBM, all of which count themselves as some of the world’s most valuable companies. This industry is very much in its infancy, which helps to explain the unparalleled growth it has experienced across the last year; however, the unique abilities AI technology possesses indicates that this industry is here to stay, and likely to continue its meteoric rise.
Lithium-Ion Batteries
As part of the global push towards more sustainable practices, one area that has seen significant focus has been the transition towards clean energy sources and the recent advancement in our understanding of lithium-ion batteries has been at the forefront of this. Prized for their incredible energy storage abilities, durability and lightweight nature, lithium-ion batteries have become an essential technology in many of the latest innovations including smartphones, laptops and electric vehicles. Continuous development of the technology, the rise of electric vehicles and the apparent crucial nature of lithium-based products for our future have made lithium companies high growth investment opportunities with many leading investment firms prepared to pay for what they see as an exponentially expanding industry. Already heralded as the fastest-growing industry in the UK, investors should look out for Cleantech Lithium PLC and Atlantic Lithium on the LSE.
Many of the most rapidly growing investment opportunities on the exchange are being directly influenced by the global societal shifts taking place today. The industries listed here all present the notion of a world tomorrow that looks very different than today, be it through the continued effects of climate change or our morphing cultural preferences. Either way, change presents the opportunity for investment and a chance to shift the balance.