FTSE 100 vs FTSE 250: What Each Index Measures
The FTSE 100 comprises the hundred largest eligible blue-chip companies in the FTSE UK Index Series, while the FTSE 250 covers the next major mid-cap segment outside the FTSE 100. Both are UK-listed share benchmarks, but neither should be assumed to measure only the domestic British economy.
Constituents and eligibility
FTSE Russell applies its own listing, nationality, liquidity, free-float and size criteria. The FTSE 100 represents large blue-chip constituents, while the FTSE 250 comprises companies not already included in that top benchmark. The precise number of share lines and reconstitution treatment are defined by index rules. A share can move between segments following changes in size, eligibility or corporate events.
Why the FTSE 100 is internationally exposed
Many large UK-listed businesses earn significant revenue outside the UK, including energy, mining, pharmaceuticals and consumer-goods groups. Their results can be affected by the US dollar, commodity prices and global growth. Therefore a FTSE 100 rise does not necessarily imply improving domestic household spending or UK manufacturing. Analysing constituents and their geographic sales is more useful than treating the index as a pure UK GDP barometer.
FTSE 250 and the UK economy
The mid-cap index includes companies with varying domestic and international exposure, but may be more sensitive to some UK-specific conditions than the FTSE 100, depending on current sector composition. Changes in Bank of England rates, domestic financing costs and consumer demand can matter. Still, no simple rule makes every FTSE 250 company a ‘UK-only’ business, and changing constituents alter the aggregate exposure.
Worked example: currency translation
Imagine a FTSE 100 company earns $1 billion abroad. At GBP/USD 1.25, the amount translates to £800 million; at 1.20, it translates to approximately £833 million. This illustrates why sterling depreciation can increase the translated value of unchanged dollar revenue, before hedging, costs and accounting rules. A weak pound is not automatically good for every constituent because imports, financing and market valuations also respond.
Weighting and concentration
Both indices use float-adjusted market-cap-style methodologies, meaning larger eligible constituents have greater influence on the index. Sector weight differences can create distinct reactions to interest rates, commodity prices and regulatory news. A large mining share might dominate one day’s FTSE 100 movement, while a mid-cap industrial rally drives the FTSE 250. Review the current weights rather than assuming an index represents each constituent equally.
Reclassification and quarterly reviews
Constituent reviews apply size and eligibility rules intended to maintain the index universe. Companies can be promoted or demoted, affecting benchmark-tracking fund flows. Announced changes may be anticipated before implementation and need not cause a predictable price jump. A company entering the FTSE 100 does not make its cash flows inherently stronger on that date.
Comparing index returns properly
Use matching price or total-return series, the same observation period and the same currency. The FTSE 100 price index can differ significantly from a dividend-reinvested version because dividends are economically important to some large UK businesses. The FTSE 250 may have different yield, volatility and sector characteristics. Comparing two headline point movements without normalising for index level is misleading.
Which index is relevant to a question?
For large UK-listed multinational companies, the FTSE 100 is a useful benchmark. For a different portion of the UK equity market, the FTSE 250 or broader FTSE All-Share may be more informative. Investors concerned about economic exposure should examine revenues, earnings and country risks rather than choosing solely on index name.
FTSE 100 and FTSE 250: compare the underlying exposure
Both contain UK-listed businesses, but the financial and geographic exposure may differ significantly.
| Issue | FTSE 100 | FTSE 250 |
|---|---|---|
| Market segment | Large eligible UK-listed companies | Major mid-cap segment outside the FTSE 100 |
| International revenue | Often substantial among multinationals | Mixed, including UK and overseas operations |
| Currency sensitivity | Can reflect the translation of foreign earnings | Depends on each constituent’s costs, revenue and hedging |
| Economic emphasis | Global sectors such as energy, mining, pharmaceuticals may matter | Domestic growth and financing can matter, but not exclusively |
| Index methodology | Free-float market-cap-based | Free-float market-cap-based |
| Analytical error to avoid | Calling it a pure UK GDP proxy | Assuming every constituent earns revenue only in Britain |
Sterling depreciation can increase the reported pound value of unchanged overseas dollar revenue, but imported inputs and dollar-denominated borrowing can offset that apparent benefit. A comparison of UK equity benchmarks should therefore examine regional earnings, sector and currency exposures as well as index levels. For performance analysis, compare total-return with total-return—or price index with price index—over identical periods. Different dividend conventions can otherwise be mistaken for differences in stock selection.
To understand the wider financial-market context, see FTSE 100 weighting and currency exposures.
Frequently asked questions
Is the FTSE 100 made up entirely of UK-focused firms?
No. Many constituents earn substantial revenue overseas.
Does the FTSE 250 contain the same companies as the FTSE 100?
It covers a different market-cap segment outside the FTSE 100 under index rules.
Are FTSE indices price or total-return measures?
Different versions exist; identify which series you are using.