The FTSE 250 is a stock market index made up of the 250 largest companies listed on the London Stock Exchange after the FTSE 100. In other words, it covers the next tier down from the blue chips: firms ranked roughly 101st to 350th by market value. It is often described as the UK’s mid-cap index, and many market watchers see it as a better reflection of the domestic British economy than its more famous big brother.
How it differs from the FTSE 100
The FTSE 100 is dominated by global giants in oil, mining, banking, pharmaceuticals and consumer goods. A large share of their revenue is earned overseas, often in US dollars. That is why the FTSE 100 can rise when the pound falls, because overseas earnings are worth more when converted back into sterling. Our explainer on the FTSE 100 and why UK traders watch it covers that index in more depth.
The FTSE 250 is different. Its members include housebuilders, retailers, leisure groups, transport companies, property firms, investment trusts and a wide range of business services. A larger share of their sales comes from the UK. As a result, the mid-cap index tends to be more sensitive to British consumer spending, UK interest rates, domestic confidence and the health of the jobs market.
How the index is built
Like the FTSE 100, the FTSE 250 is weighted by market capitalisation, adjusted for the shares that are freely available to trade. Larger companies have a bigger influence on the index level, though the spread is more even than in the FTSE 100, where a handful of giants can drive the whole index. Our guide to market capitalisation explains how company size is measured.
Membership is reviewed every quarter. Companies that grow large enough can be promoted to the FTSE 100, while those that shrink may drop out of the FTSE 250 altogether. Those reshuffles can cause short-term moves as index-tracking funds adjust their holdings.
What tends to move the FTSE 250
Because of its domestic tilt, the FTSE 250 often reacts to UK-specific news. Changes in Bank of England rate expectations matter, since many mid-sized companies are more reliant on borrowing and more exposed to the cost of mortgages and consumer credit. Fiscal events such as the Budget, UK inflation data and retail figures can all shift sentiment. When investors feel more confident about Britain, the mid-caps often lead. When they worry about a slowdown, the mid-caps frequently lag.
Global risk mood still matters. In a broad sell-off, smaller and mid-sized companies can fall harder than large, cash-rich multinationals, partly because they are seen as riskier and partly because their shares can be less liquid. Our piece on why small-cap stocks struggle when yields rise explores a related pattern.
Why traders watch it
Many traders and investors use the FTSE 250 as a barometer for UK economic sentiment. A strong run in mid-caps alongside a flat FTSE 100 can signal that investors are warming to the domestic story. The reverse can hint at growing caution about the UK economy. Comparing the two indices is a simple way to see whether moves are driven by global factors or by Britain itself.
Common beginner mistakes
The first is assuming the FTSE 250 will always follow the FTSE 100; their drivers often differ, especially when sterling moves sharply. The second is ignoring liquidity. Some mid-cap shares trade less actively, which can mean wider spreads and sharper moves on news. The third is treating an index trend as a guarantee about any individual member. A rising index can still contain plenty of falling shares.
Bringing it together
The FTSE 250 tracks Britain’s mid-sized listed companies and leans more heavily on the domestic economy than the FTSE 100. UK rates, consumer health and confidence tend to matter more, and comparing the two indices can reveal what is really driving London’s market.
If you want to check how ready you are to trade UK indices with a clear plan, our free trader assessment is a sensible place to start.
