NATIONAL GRID PLC (NG) SHARES: 2025 PERFORMANCE IN UK, KEY DRIVERS, MILESTONES AND RISKS —'26 OUTLOOK

National Grid’s 2025 Performance in the UK

National Grid plc (LSE: NG), a key player in the UK's energy infrastructure, played a pivotal role during 2025 as the country pressed ahead with its net-zero ambitions, grid modernisation, and energy security. Amid regulatory shifts, macroeconomic fluctuations, and rising focus on clean energy, NG shares experienced varied momentum throughout the year.

Full-Year Financial Results

National Grid reported robust full-year results for FY2024-2025. Underlying earnings per share (EPS) stood at 67.2 pence, slightly ahead of consensus expectations. Operating profit rose by an estimated 8% year-over-year, buoyed by regulated revenues across its UK Electricity Transmission and Distribution businesses. Total group revenues were projected to exceed £18 billion, with a clear uptick driven by increased capital investment and rate base growth.

Stock Performance Recap

In terms of share price performance, NG shares displayed resilience, particularly as investors sought stable, dividend-paying blue chips in a volatile market. NG share prices fluctuated within the £10.75 – £12.10 range during the year. Despite wider market pressures, including interest rate worries and energy price uncertainty, shares posted a modest gain of around 6% in 2025, supported by income-focused investors seeking NG’s stable dividend, which yielded close to 5.6% based on the end-year price.

Strategic Capital Investments

One of the year’s highlights was National Grid’s £7.7 billion capital expenditure programme, centred on UK electricity transmission and offshore wind integration. Its flagship project, the Eastern Green Link (EGL2), progressed into the advanced construction phase, setting a major national milestone in renewable energy transmission infrastructure.

Regulatory and Policy Developments

• RIIO-2 Framework: NG witnessed regulatory tailwinds as Ofgem confirmed continued backing of transmission upgrades under the RIIO-2 price control.
• Energy Security Strategy: Enhanced governmental focus on boosting domestic grid reliability favoured NG’s long-term investment case.
• Labour Market Constraints: Workforce shortages in engineering trades marginally elevated project delivery timelines, though mitigated by internal apprenticeship schemes.

Dividend Stability and Yield

For income-focused investors, NG remained a firm anchor. The final dividend for the year was announced at 33.1 pence, an increase of 4%, maintaining NG’s track record of progressive payouts. Strong cash generation underpinned these distributions without leverage strain, thanks to disciplined capital allocation.

Operational Milestones Achieved

• Commissioning of the Hinkley-Seabank connection
• Launch of grid digitalisation pilot programme with Ofgem
• Start of work on North Sea Link stage 2 planning

National Grid’s performance in 2025 underscored its role as a critical infrastructure utility poised to benefit from the energy transition story. Despite some operating environment challenges, the share performance reflected underlying stability and long-term investor confidence.

Major Drivers Behind NG Shares in 2025

Several interlinked factors shaped National Grid’s growth trajectory through 2025. These drivers didn’t just reflect financial fundamentals, but intertwined with broader themes in regulation, environmental commitments, and infrastructure demand. Here are the key growth and risk factors that influenced National Grid plc's UK performance:

1. The UK's Decarbonisation Plan

Government targets to reach net-zero emissions by 2050 sustained policy and fiscal support for clean energy. National Grid, with its strategic base in transmission and distribution, was a direct beneficiary of this momentum.

• Multiple new offshore wind farm connections were approved, requiring vast upgrades to onshore grid frameworks.
• The company’s Future System Operator (FSO) role, now formalised, gave NG direct oversight and assets to optimise grid planning across decarbonising sectors.

2. Regulatory Incentives

The RIIO-2 framework remained integral, rewarding National Grid for innovation, reliability, and customer satisfaction. The ongoing “Net Zero Re-openers” allowed for additional baseline funding to fast-track qualifying green projects.

3. Defensive Utility Characteristics

NG’s utility status ensured steadier earnings and cash flows, appealing under high interest rate conditions. Investors moved towards defensive stocks amid monetary policy tightening, reinforcing share support.

4. FX Exposure and US Asset Contribution

Approximately 50% of NG’s EBITDA came from its US operations. The GBP/USD exchange rate fluctuations marginally skewed profits, especially as sterling weakened in H2 2025. Nonetheless, US revenues provided currency-diversified backing.

5. Supply Chain Pressures

Availability of advanced grid components, like HVDC cables and substations from European vendors, remained pressured. Delays in procurement cycles added unforeseen costs, although mitigated through negotiated supplier agreements with long-term commitments.

6. Rising Cost of Capital

Interest rate hikes through early 2025 increased National Grid’s overall cost of capital. However, index-linkages in allowed revenues helped offset inflationary impacts. NG’s BBB+ credit rating was affirmed, keeping bond spreads contained.

7. Investor Sentiment and ESG Orientation

Institutional investors and sustainable ETFs continued allocating capital into transition-focused infrastructure plays. NG attracted inflows from ESG-conscious portfolios due to its clean energy projects pipeline and transparent governance disclosures.

8. Workforce and Talent Pool

Ongoing investments in electrical engineering and apprenticeship programmes helped alleviate near-term labour gaps. Yet, persistent recruitment bottlenecks raised long-term questions about UK grid workforce capacity.

Other Drivers of Note:

• Technological Integration: Partnerships with AI grid start-ups to optimise energy load balancing
• Consumer Bills Sensitivity: Ofgem pressures to keep network charges within tolerance limits capped margins slightly
• Inflation Trends: Index-linked revenue models shielded the most direct exposure

All combined, 2025’s performance for National Grid shares in the UK was the result of harmonising regulatory support, strategic capital deployment, and macroeconomic navigation. While not a high-growth equity, it solidified its role as an essential, stable utility investment.

What to Watch for National Grid in 2026

As we look ahead to 2026, a number of pivotal aspects will likely shape the future course of NG shares. For long-term investors and sector observers, National Grid's strategy continues to align with the UK's net-zero and grid resilience vision, but several headwinds could test this narrative.

1. Evolution of Grid Modernisation

Key to 2026 will be National Grid’s performance in delivering on multi-year projects such as EGL2, subsea cables under the North Sea, and smart grid integration pilots. These are expected to complete key development milestones mid-to-late 2026.

• Progress reporting on real-time grid digitalisation technology adoption will be closely watched by investors.
• Success of mid-scale pilot programmes with AI-driven demand management could position NG ahead of competitors.

2. Energy Policy and Political Landscape

With a potential UK general election in 2026, shifts in energy regulation and spending priorities may emerge. Investors will scrutinise manifestos from opposing parties to assess future support for utility infrastructure expansion and decarbonisation funding.

3. Cost of Capital and Rate Hikes

Continued volatility in the Bank of England’s base rate and inflation trajectory may exert pressure on utilities if bond yields rise further. NG’s capital-intensive business model remains sensitive to debt costs, although indexation in revenues provides partial hedging.

4. Supply Chain and Materials Pricing

National Grid’s 2025 experience with delayed component shipments places ongoing attention on its supplier diversification strategy. Any geopolitical or macroeconomic shocks (e.g., EU-China trade imbalance or copper/raw materials scarcity) could delay UK infrastructure works through 2026.

5. Dividend Growth Expectations

While 2025 saw consistent dividend growth, the extent of payout increases in 2026 may hinge on asset efficiency and regulatory returns. Analysts expect a mid-single digit rise once again, maintaining income appeal — but dependent on leverage limits and capex absorption.

6. ESG Scrutiny and Reporting

2026 will bring advancing regulations around ESG disclosure, particularly Scope 3 emissions and biodiversity metrics. NG’s transparency and adaptive response will influence its standing among sustainability-focused investors and international indices.

Risks and Uncertainties in Focus

• Labour Market Tightness: Continued skilled labour shortages across UK construction and engineering may elevate capex delays.
• Negative Regulatory Revisions: Intense political focus on lowering energy bills could pressure Ofgem to reduce allowable returns.
• Infrastructure Failures: Any missed project deadlines could generate reputational hits, particularly relating to interconnectors or decarbonisation targets.

Monitoring Guidance Updates

Investors should prioritise checking updates from NG’s half-year and full-year financials for revised capex guidance, dividend commitments and delivery milestones. Likewise, commentary from Ofgem and National Infrastructure Commission (NIC) reports can inform strategy alignment and changes in regulated returns models.

2026 stands as a critical waypoint for National Grid’s long-term agenda. Balancing execution risks with promising structural tailwinds, the year is expected to reveal how effectively NG can scale a smarter, greener grid under tightening fiscal and political conditions.