Deutsche Bank Research has moved National Grid Plc down a notch, changing its recommendation from "buy" to "hold" and reducing its target price to 1,250p from 1,370p. The research house said valuation considerations and increasing uncertainty over potential shifts in UK government policy underpinned the decision.
Analyst James Brand highlighted that UK government policy has been "highly supportive for UK utilities, encouraging record investment." That supportive stance has been a backdrop for the sector, but Deutsche Bank warned the political picture may be shifting.
The bank pointed to prediction markets showing a probability above 80% that a new Labour prime minister will be chosen this year, and cited Oddschecker data naming Andy Burnham as the current favourite. Brand noted that Burnham has publicly supported stronger "public control" of UK water and energy utilities - a stance Deutsche Bank said introduces additional uncertainty for the sector.
Against this political backdrop, Deutsche Bank reduced target prices across the UK utilities sector, with National Grid's target trimmed by 120p to 1,250p and the stock downgraded to "hold." Brand added that National Grid "trades at a significant premium after adjusting for its extra 'fast money' allowances," and that this premium contributed to the change in recommendation.
The research note places the rating and target move in the context of both macro-political risk and company-level valuation. Deutsche Bank's adjustment was not isolated to National Grid - it formed part of a broader reassessment of UK utilities' price targets given the potential for more interventionist policy under the scenario the bank describes.
Market data included in the background material showed National Grid trading at 1,202.00, down 15.50 or 1.27% at the time of the snapshot. The research firm did not add new guidance beyond the revised target and its rationale related to valuation and policy uncertainty.
Context and implications
The downgrade reflects two stated factors from Deutsche Bank's research: a valuation that looks rich after specific allowance adjustments, and a rising probability of political change that could alter the regulatory and ownership landscape for UK utilities. Both factors were cited explicitly in the bank's note as driving the decision to lower target prices across the sector, including National Grid.
Deutsche Bank's move signals increased caution toward utilities exposed to potential policy shifts on public control and regulation, while highlighting how valuation metrics influence analyst ratings even in a traditionally supportive policy environment.