Are these the best UK shares to watch in May 2025?

In 2025, the UK’s economic landscape continues to deliver a mixed outlook. GDP growth for February increased by 0.5%. Further growth is expected in the latter half of the year, but uncertainties surrounding potential US tariffs may threaten this.

The labour market is expected to remain stagnant as higher employment costs are expected to cause slowing pay growth and fewer vacancies. Unemployment is also expected to increase slightly.

Whilst it’s clear that interest rates are on their way down, these cuts will be more gradual if inflation remains high. At its next meeting on 8 May the BOE is expected to cut interest rates by 0.25 basis points to 4.25%.

Although inflation is expected to rise above its current figure of 3.4% in the short term, the BOE predicts that US tariffs could have a deflationary effect on the UK economy so rate cuts could be more frequent than was initially expected.

There are, however, many uncertainties surrounding these tariffs and there’s also the possibility they could add to inflation. If this is the case, rate cuts will be more gradual.

Best UK shares to watch

Considering these issues, here are five shares we think could be the best UK stocks to buy now. These dividend, growth or value shares have been selected from recent market news. Always do your own research. Past performance is not a guide to future performance.

Open an account and trade some of the best UK stocks now

1. M&G

2. Phoenix

3. LSL Property Services

4. Babcock International

5. Card Factory

Top dividend stocks

M&G (LON: MNG)

Savings and investment company M&G operates through two main divisions, asset management and life insurance. Although this business model can be confusing to less experienced investors which can reduce demand, it also has many advantages.

In 2024, the company delivered a strong performance, largely due to effective cost reductions and strong results from its asset management division.

On 27 March this year, the company announced an interim dividend of 13.50p which will be paid out to shareholders in May. If its strong performance continues, the company has committed to increasing its dividend each year.

Looking ahead, M&G plan to expand its Asset Management and Wealth side of the business to represent half of total profits, whilst slowly phasing out its annuity portfolio and legacy products.

Dividend yield: 10.3%

Dividend cover ratio: 1.4

Phoenix Group (LON: PHNX)

Savings and retirement company Phoenix Group delivered a strong performance in 2024, with a 31% increase in operating profit, which was largely due to solid growth across its pensions, savings and retirement solution segments.

On 3 April shareholders received a dividend of 27.35p up from 26.65p the year before. With a cover ratio of 6.0 the company appears well positioned to offer strong dividend payments throughout 2025.

Phoenix Group remains optimistic about its performance for the rest of the year and plans to invest in growth and reduce debt.

Top growth stocks

LSL Property Services (LON: LSL)

Real estate company LSL Property Services reported strong full-year results for 2024 despite market challenges, where underlying operating profit increased significantly reaching £27.7 million. This was largely due to successful restructuring in 2023.

Throughout 2024, the company made several investments which should help generate future growth. These include product development, business acquisitions and tech upgrades,

LSL has a PEG ratio of 0.11, indicating its stock is currently undervalued and could see a significant price increase in the coming months.

Our analysts have given the stock a strong buy rating, with a predicted upside of 43% over the next year.

Babcock International (LON: BAB)

Babcock International is a security, defense and aerospace company based in the UK. It operates worldwide across 4 main areas: Nuclear (Submarines and engineering services), Marine (marine infrastructure and naval ships), Aviation (Piolot training and equipment support) and Land (vehicle fleet management and training).

The company reported strong FY25 results where all sectors performed well. Revenue reached £4.83 billion, driven by an 11% increase in organic growth, particularly in Marine and Nuclear. Underlying operating profit also increased, and was up 17% year-over-year. This exceeded market expectations. Babcock also successfully secured a steady backlog of future projects which will likely lead to future revenue.

Babcock international’s PEG ratio stands at 0.04 suggesting its undervalued and has growth potential.

Our analysts have given the stock a buy rating and predict its stock price will rise by almost 10% over the next year.

Top value stocks

Card Factory

Retail company Card Factory reported a strong performance over the Christmas period with total sales increasing by 4.7% in November and December due to a higher basket value. Although an increase in the National Living Wage and employer National Insurance will raise costs by up to $14 million, the company remain on track to deliver its full year guidance whilst seeing continued sales growth despite the difficult economic environment.

Card Factory has a P/E ratio of 8.1, which is below the industry average of 12.3. Its P/B ratio is 1.1. These fundamentals indicate that the stock is undervalued relative to its assets and its stock price could increase in the coming months.

Our analysts have given the stock a strong buy rating with a predicted upside of almost 70% over the next year.

How to invest or trade in UK shares with us

1. Learn more about UK shares
2. Decide whether you want to trade or invest
3. Open an account with us or practise on a demo
4. Search for your chosen share on our web platform or app
5. Make your investment or trade

When you invest in shares you buy them outright and become a partial owner of a company with the view of building wealth over time.

Trading takes a shorter—term approach which involves leverage. This allows you to take a position that’s larger than your initial deposit so both profit and losses are magnified.

For example, if you trade with 5:1 leverage, you could manage a £5000 position by placing a £1000 deposit. A 10% market shift could result in 50% profit or loss on your initial margin.

Although negative balance protection stops you from losing more than your initial deposit, market movements are unpredictable, and you could still lose your full deposit.

Top shares to watch summed up

The above five companies are just a small selection of top UK shares to buy now. Remember that any company can also fail and always do your own research.

Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.

*Based on revenue excluding FX (published financial statements, October 2021).