3 UK stocks that could benefit from interest rate cuts

British Land

British Land creates and operates places for people to work, shop and live in. Its portfolio of commercial property is focused on London-based campuses and urban logistics, as well as retail parks across the UK.

The group’s last set of results showed encouraging signs of a recovery in the sector, and full-year guidance got a small upgrade as a result. With markets pencilling in at least three more interest rate cuts in 2025, its property values could also be in line for a boost.

Alongside stabilising construction costs and rising rents, that should help fuel increased activity in the sector.

The group recently sold its stake in Finsbury Avenue (office spaces in the City of London) at a double-digit premium to book value. We’re cautiously optimistic that more business can be done at favourable terms.

While its London campuses are the main story, the retail parks have been the standout performer of late, with rents exceeding expectations.

These parks are popular with retailers because they’re affordable, easy to access, and adaptable.

The group’s growing portfolio in this area is well-positioned to benefit from continued demand for out-of-town shopping locations.

Tariffs won’t have much of a direct impact on British Land. However, if they cause a global economic slowdown, there could be less demand for its commercial properties, and rents could come under pressure.

The company’s finances remain strong, with enough funding available to help support future growth and dividends. It currently offers a prospective 6.0% dividend yield, and the flexibility in its dividend policy provides additional security in uncertain times.

We think British Land is well-positioned for the future, with its portfolio being shifted to areas with strong potential for growth. But this adds some risk. And if interest rate cuts don’t come through as expected, sentiment will be impacted.

Next

The retail powerhouse, Next, continues to deliver for both customers and investors alike. Full-year results were strong, beating market expectations despite several upgrades to guidance throughout the year.

That positive momentum has continued into the new financial year, with the group again upgrading guidance just eight weeks into the year.

If interest rate cuts come through as expected this year, consumer confidence and spending power should improve, leaving Next well-positioned to benefit.

UK sales remain strong, with significant investment in IT infrastructure helping to support the ongoing shift from in-store to online sales.

Overseas growth is where we see the next big opportunity.

Overseas sales are forecast to eclipse £1.1bn this year, before growing at around 18% for each of the next three years.

While there are plenty of positives to take away from Next’s position in the industry, it’s important to remember that retail is a fickle sector. Styles can change quickly, meaning the group will always be chasing a moving target to deliver the right offering to customers. And any big missteps on this front will be costly.

While tariffs are likely to weigh on sales in the US, we’re cautiously optimistic that other regions can pick up the slack.

But if tariffs cause a global economic slowdown, we could see consumers become more hesitant to refresh their wardrobes, and sales growth would likely slow.

The balance sheet is strong, and cash generation is healthy. That means there’s plenty of room to fund ongoing share buybacks and a prospective dividend yield of 2.1%.

Next remains one of our favourite names in the retail industry, and we see the potential for more success if it can nail its overseas expansion. We don’t think the valuation is too demanding given its strong market position. But given how cyclical the industry can be, investors still need to prepare for ups and downs.

A director of Hargreaves Lansdown plc is a Non-Executive Director of Next plc.

Persimmon

Persimmon’s had a good start to the year, with the housebuilder seeing sales rates edge slightly higher over the spring selling season. If interest rate cuts come through as expected over the rest of 2025, Persimmon’s likely to see a further uptick in buyer activity.

That’s because falling rates are normally a tailwind for buyers, increasing their purchasing power.

A potential homebuyer with a £1500 monthly mortgage budget has over 10% more borrowing capability if they can secure a mortgage deal at 4.0% rather than 5.0%.

We’re pleased to see average selling prices ticking higher and the order book growing at pace too. It takes a bit of time for these orders to convert to sales, but the positive momentum should feed down to the bottom line. Markets are currently forecasting pre-tax profits to grow nearly 14% to £432mn this year.

The in-house materials businesses, which we see as a key differentiator, should help on the profitability front too. They give Persimmon quick and cheaper access to key materials. When Persimmon’s able to use its own bricks, tiles and timber, it saves around £5,500 per plot.

The balance sheet was in decent shape last we heard, and improving cash flows should help to support the current 4.8% forward dividend yield.

But keep in mind that there’s still plenty of macroeconomic uncertainty. Given that operations are focused on this side of the Atlantic, Persimmon has no direct exposure to tariffs. But if tariffs cause a global economic slowdown, we’re likely to see demand for its houses weaken.

Persimmon’s valuation is sitting well below the long-term average, which could offer an attractive opportunity for long-term investors. But the sector is sensitive to economic headwinds. And any setbacks to current rate cut expectations could delay housebuilding activity ramping back up to full flow.