Why More UK Investors Are Buying Retail Bonds Again
After years of low interest rates, UK investors are rediscovering retail bonds. Here’s why companies are turning back to everyday savers for funding and what it means for markets.
The UK’s retail bond market is quietly coming back to life. After a decade of near-zero interest rates and muted demand, higher yields and investor appetite for stable income have revived direct bond offerings to individuals.
The Return of the Retail Bond Market
Retail bonds allow individual investors to lend directly to companies, usually via listings on the London Stock Exchange’s Order Book for Retail Bonds (ORB). These bonds typically pay fixed interest — or “coupon” — twice a year, and return the principal at maturity.
According to the London Stock Exchange, total ORB trading volumes rose by 42 percent in the first half of 2025 compared with 2023 levels. New issues from utilities, property developers, and renewable energy firms have attracted strong demand.
Source: London Stock Exchange – ORB Market Data 2025
Why Retail Bonds Are Returning
1. Higher Yields
With the Bank of England base rate holding around 5 percent, companies must offer attractive coupons — often 6–8 percent — to compete for investor attention. That’s a significant improvement from sub-2 percent returns typical a few years ago.
Source: Bank of England – Bank Rate History
2. Investors Seeking Predictable Income
After market volatility in equities, many savers want stable, predictable returns. Retail bonds provide transparency and regular payments that outperform typical savings accounts.
3. Company Demand for Non-Bank Financing
Corporate borrowing costs have risen sharply due to tighter lending standards. Issuing bonds directly to the public diversifies funding and avoids restrictive bank covenants.
According to the Office for National Statistics, UK corporate lending from banks fell 6.4 percent year-on-year in Q2 2025, while bond issuance rose 11 percent.
Source: ONS – UK Corporate Finance Statistics, 2025 Q2
The Types of Bonds Being Issued
- Infrastructure Bonds: Renewable energy and housing projects seeking long-term capital.
- Property Bonds: Developers offering fixed returns backed by specific assets.
- Corporate Bonds: Issued by household names such as utilities and transport firms.
- Green Bonds: Sustainability-linked projects with environmental performance targets.
Retail bond maturities typically range from 3 to 10 years, with most issued in £100 denominations to encourage accessibility.
The Risks
While retail bonds offer appealing yields, they carry real risks:
- Credit Risk: If the issuer defaults, investors may lose capital.
- Liquidity Risk: Retail bonds trade on ORB but volumes can be low.
- Interest Rate Risk: If rates rise further, existing bonds lose value.
The Financial Conduct Authority (FCA) warns that retail bonds are not covered by the Financial Services Compensation Scheme (FSCS). Investors must perform due diligence or use diversified bond funds.
Source: FCA – Retail Bond Guidance 2025
A Shift in Investor Behaviour
Retail bonds reflect a broader behavioural shift — UK savers are becoming lenders. After years of leaving cash idle in low-yield accounts, they are now actively seeking instruments that align with fixed-income market returns.
Research by Barclays Smart Investor found that 28 percent of investors aged 35–54 plan to buy corporate bonds in 2025, up from 17 percent in 2023.
Source: Barclays Smart Investor – Retail Bond Survey 2025
The Bottom Line
Retail bonds are re-emerging as a serious alternative for income-focused investors. Higher interest rates, improved access, and diversification opportunities make them appealing again — but they remain unsuitable for those unable to tolerate default or liquidity risk.
As the UK enters a period of sustained but moderate growth, the renewed connection between companies and individual investors through bond markets marks a quiet yet meaningful shift in financial culture.
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