UK investors are increasingly turning to small-cap stocks as the FTSE 100 and FTSE 250 face continued headwinds. These lesser-known companies offer strong financials and solid growth prospects, even in challenging market conditions.

This article highlights five standout UK small-cap stocks that remain under the radar but offer compelling long-term value.

Market Overview

Weak trade data from China has impacted the UK’s large-cap and mid-cap indices, with the FTSE 100 and FTSE 250 struggling to maintain momentum. Amid this uncertainty, small-cap stocks present opportunities for investors seeking growth at a discount.

These smaller companies often operate efficiently, boast strong balance sheets, and offer potential upside due to their undervalued market positions.

Top UK Small-Cap Stocks to Watch

Andrews Sykes Group (AIM: ASY)

• Market Cap: £209.29 million
• Sector: Environmental control equipment hire and sales
• Highlights: Debt-free with £19.44 million in free cash flow, trading at a 40.1% discount to fair value. Consistent dividends and stable profits add to its appeal for long-term investors.

London Security (AIM: LSC)

• Market Cap: £441.36 million
• Sector: Fire protection equipment
• Highlights: Operates across Europe with a low debt-to-equity ratio of 0.2%. Shares are 48.8% below estimated fair value, offering strong defensive characteristics in uncertain times.

Cohort (AIM: CHRT)

• Market Cap: £461.40 million
• Sector: Defence and security
• Highlights: 46.4% earnings growth over the past year. Holds more cash than debt, allowing it to pursue strategic opportunities in a growing sector.

Griffin Mining (AIM: GFM)

• Market Cap: £289.56 million
• Sector: Zinc and gold mining
• Highlights: 116.5% earnings growth driven by Caijiaying operations. Stock trades at a 67% discount to fair value, making it a compelling choice for commodity investors.

B.P. Marsh & Partners (AIM: BPM)

• Market Cap: £135.69 million
• Sector: Financial services investment
• Highlights: Revenue up 29.42% and earnings up 31.34% in the past year. Offers long-term value through niche sector focus and a proven track record.

Investment Benefits and Risks

Why Small-Caps Stand Out

• Growth potential: Many are in early stages of expansion, offering outsized returns.
• Undervaluation: Often overlooked, providing discounted entry points.
• Agility: Faster response to market changes than large corporations.

Key Risks

• Liquidity: Lower trading volume can lead to wider bid-ask spreads.
• Volatility: More susceptible to price swings and external shocks.
• Limited coverage: Fewer analyst reports require thorough independent research.

How to Buy Small-Cap Stocks

UK investors can access these stocks through platforms like Hargreaves Lansdown, AJ Bell, and Interactive Investor. Always compare platform fees and research tools before making investment decisions.

Final Thoughts for 2025

As the FTSE 100 and FTSE 250 face macroeconomic challenges, small-cap stocks offer a route to strong returns through targeted opportunities. The five companies highlighted—Andrews Sykes, London Security, Cohort, Griffin Mining, and B.P. Marsh & Partners—demonstrate strong fundamentals and long-term growth potential.

While risks exist, careful research and a clear investment strategy can help investors uncover valuable hidden gems across the UK market.