2025 was a stellar year for FTSE shares. Looking just at the UK’s flagship index, the FTSE 100 delivered a record-breaking 26% total return. And with the impressive momentum continuing in 2026, that number’s closer to 35%, including the last two months.
Yet, this could be just the tip of the iceberg. In fact, investors could be looking at a buying opportunity in British businesses that haven’t been seen in almost a decade.
An economic rebound?
Looking at the UK’s economy today, there’s plenty to be gloomy about, including stubbornly above-target inflation and rising unemployment. However, something that’s seemingly fallen below the radar of most investors is that productivity’s actually rising, with the latest forecasts for 2025 placing estimated growth at 1.4%.
Excluding the post-pandemic economic recovery, that’s the highest projected level of productivity growth seen since 2017, and just prior to the 2008 financial crisis before that. And if this improvement can be sustained, it could create a powerful tailwind that most FTSE shares can capitalise on.
Digging deeper, there are two possible factors driving this surprise surge.
The first is that investments made by businesses to cut costs and improve efficiency over the last few years are finally starting to pay off. And we’re already seeing supportive evidence of this with record profits emerging and rising profit margins among many UK stocks.
However, the second explanation’s less exciting. Due to the government increasing both employer National Insurance contributions and the Minimum Wage, low-paid jobs, particularly in the hospitality and retail sectors, have been cut, temporarily boosting the perceived productivity of the remaining workforce.
The truth is likely a combination of both factors. But as it turns out, there are several FTSE shares that can benefit either way.
A hidden winner?
Regardless of whether productivity’s being boosted through operational efficiency or labour restructuring, Kainos Group (LSE:KNOS) still benefits.
The company offers a portfolio of software and digitalisation services to help businesses automate operations and become more efficient. If companies need to cut back on jobs, Kainos can help ensure minimal disruption. If companies want to become more efficient with their existing workforces, Kainos can help implement artificial intelligence (AI) and other software solutions.
This nifty combination has already translated into record sales and orders across the first half of its 2026 fiscal year (ending in March). Meanwhile, its relatively new software-as-a-service segment is currently on track to surpass £100m high-margin recurring revenue by the end of this year.
Needless to say, this structural tailwind bodes well for Kainos shareholders. But of course, there are still some risks. One of the firm’s biggest customers is the UK government, making it susceptible to budget cuts, particularly for the NHS.
At the same time, with the rise of new AI models potentially lowering long-term demand for external digitalisation experts, this economic productivity tailwind may end up being offset.
Nevertheless, AI disruption risk is potentially problematic for its currently larger services segment. By comparison, its rapidly expanding software arm appears to be an AI beneficiary. And with management aggressively investing in this long-term growth engine, this risk could be mitigated.
That’s why, in my opinion, Kainos could be worth a closer look. And it’s not the only FTSE share I’ve got my eye on right now.
